Europe

Robeco Trains Sights on Finance Sector Climate Policies

Decarbonisation of portfolios one of five new engagement priorities for Dutch asset manager.

Netherlands-based asset manager Robeco will actively engage with firms across the finance sector to monitor and ideally accelerate their efforts to reduce carbon emissions resulting from their investment and lending activities.

This new focus on the net-zero transition efforts of the finance sector is one of Robeco’s five new engagement priorities for 2021. In addition, the firm will also focus this year on climate change laggards across multiple sectors, unsecure working conditions and labour practices, human rights due diligence and the social impact of gaming.

Robeco’s active ownership team will engage with financial institutions funding high emitting sectors and companies as a matter or priority.

Peter van der Werf, Senior Engagement Specialist, pointed out that fossil fuel financing by banks has grown every year since the Paris Climate Agreement was signed in 2015. As a sector exposed to the physical, transition and liability risks of climate change, Robeco will be calling on financial institutions to set climate targets and ensure alignment of their portfolios with the Paris Agreement.

“Global banks have an important role in financing the transition to a Paris-aligned economy. Among globally diversified banks, there are still a lot with a significant exposure through their lending book to carbon-intensive industries, which run a risk of being forced by the move to a Paris-aligned global economy to make significant changes,” he said.

As part of the engagement exercise, Robeco will develop a set of investor expectations, in collaboration with other members of the International Investor Group on Climate Change, to set out minimum standards of reporting against guidelines set out by the Task Force on Climate-related Financial Disclosures.

Although many large financial institutions have made commitments to achieving net zero emissions from their portfolios by 2050, several high-profile banks have been targeted by investors for not acting in line with their stated future intentions.

Earlier this month, a group of investors coordinated by UK non-profit ShareAction called on HSBC to publish a credible plan for reducing its exposure to fossil fuels. In October last year, the Science-Based Targets initiative launched a framework to help financial institutions to verify that their plans to decarbonise their loan books, portfolios and operations are aligned with the UN Intergovernmental Panel on Climate Change recommendations.

The introduction of three new engagement themes on social topics partly reflects issues highlighted by the impact of the Covid-19 pandemic. The forced closure of large sectors of the economy, notably non-food retail and hospitality, has increased the need to address employment rights more urgently, said van der Werf, especially of those working in the ‘gig economy’, while the pandemic-induced lockdowns had vastly increased the number of people engaging regularly with gaming activity, with potentially negative implications for mental health.

Robeco added that its human rights due diligence theme would focus in particular along supply chains, noting that present efforts within sectors including automotive, apparel and technology were not adequately addressing potential rights abuses.

These new themes augment an extensive existing engagement programme, covering more than 20 environmental, social and governance issues. Robeco typically runs each theme for approximately three years, engaging with firms across its portfolio depending on materiality.

Robeco has approximately €158 billion in assets under management, of which €138 is committed to ESG integration. In December, the firm announced its commitment to achieving net-zero emissions from its portfolios by 2050 or sooner, setting and reviewing carbon reduction targets every five years.

Robeco was also one of 30 asset managers, collectively responsible for US$9 trillion AUM, to found the Net Zero Asset Managers Initiative last year.

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