TBLI CONFERENCE™ EUROPE 2014 - Managing Sustainability Risks - Jaap Hoek - Rabobank
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Transcript of TBLI CONFERENCE™ EUROPE 2014 - Managing Sustainability Risks - Jaap Hoek - Rabobank
Managing Sustainability Risks for Investors – Where to start?
A case study
Amsterdam, 29 October 2014
Robeco Investment Solutions
Jaap Hoek
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For professional investors
Source: Do institutional investors have sensible investment beliefs? Kees Koedijk & Alfred Slager (2009)
The setting
What are the investment beliefs?
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Strategic Asset Allocation process & Sustainability
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> Ang, Goetzmann and Schaefer (2009, “The Norwegian Study”) and Koedijk, Slager and Stork (2013) conclude that allocation to systematic factor premiums should be a strategic decision
> Equity factor premium investing should play a key role in strategic asset allocation process
> The challenge is to embed sustainability in this process
Strategic Asset Allocation process & Sustainability
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The integration of Sustainability into the SAA process involves 3 steps: Assess the Sustainability profile of the investments
Assess the exposures of the investments to strategic factor premiums like Value,
Momentum and Low Volatility
Assess the risk/return profile of the investments in different scenarios, and, if necessary, mitigate adverse exposures
Case study: from mainstream index towards sustainable fund
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MSCI World
MSCI World ESG
DJSI World Developed Diversified
Example Fund – Quant Sustainable Global Equities (QSGE)
− Launch date July 1999 − 1612 companies
− Launch date October 2007 − 822 companies
− Launch date May 2013 − Back-tested data October 2002 − 543 companies
− Launch date February 2014 − Back-tested data September 2001 − 485 companies
“Does it cost performance?“
“What is the best way to measure sustainability?“
“How does it affect my strategic factor premium exposures?”
“Does it cost performance?” (1)
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-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
2008 2009 2010 2011 2012 2013
MSCI World
MSCI World ESG
DJSI Diversified
QSGE
Source: Robeco, MSCI and DJ The value of your investment may fluctuate. Past performance is no guarantee of future results
“Does it cost performance?” (2)
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MSCI World
MSCI ESG
8%
9%
10%
15% 16% 17% 18% 19% 20%
Ret
urn
Risk
Risk-return plot
Source: Robeco and MSCI The value of your investment may fluctuate. Past performance is no guarantee of future results
“How does it affect my strategic factor premium exposures?” (1)
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-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
Top Middle Bottom
Value Momentum LowRisk
Factor scan for DJSI Developed Diversified
Source: Robeco and DJ
“How does it affect my strategic factor premium exposures?” (2)
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-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
Top Middle Bottom
Value Momentum LowRisk
Factor scan for Quant Sustainable Global Equities
Source: Robeco
From Mainstream Index Towards Sustainable Funds
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MSCI World
QSGE
MSCI ESG
8%
9%
10%
15% 16% 17% 18% 19% 20%
Ret
urn
Risk
Risk-return plot
Source: Robeco & MSCI The value of your investment may fluctuate. Past performance is no guarantee of future results
What is the best way to measure sustainability?
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Source: Robeco & MSCI
Strategic Asset Allocation process & Sustainability
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The integration of Sustainability into the SAA process involves 3 steps: Assess the Sustainability profile of the investments
Assess the exposures of the investments to strategic factor premiums like Value,
Momentum and Low Volatility
Assess the risk/return profile of the investments in different scenarios, and, if necessary, mitigate adverse exposures
For discussion
Should one include strategic factors or financial risks in the allocation to sustainability, or is that best dealt with in other parts of the portfolio?
Important information
Robeco Institutional Asset Management B.V. (trade register number: 24123167), hereafter Robeco, has a license as manager of UCITS and AIFs from the Netherlands Authority for the Financial Markets in Amsterdam. Without further explanation this presentation cannot be considered complete. It is intended to provide the professional investor with general information on Robeco’s specific capabilities, but does not constitute a recommendation or an advice to buy or sell certain securities or investment products. All rights relating to the information in this presentation are and will remain the property of Robeco. No part of this presentation may be reproduced, saved in an automated data file or published in any form or by any means, either electronically, mechanically, by photocopy, recording or in any other way, without Robeco's prior written permission. The information contained in this publication is not intended for users from other countries, such as US citizens and residents, where the offering of foreign financial services is not permitted, or where Robeco's services are not available. The prospectus and the Key Investor Information Document for the Robeco Funds can all be obtained free of charge at www.robeco.com.
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