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Integrated approach & intensified engagement

21-09-2017 |

The Triodos SRI funds invest in bonds and global equities issued by listed companies that offer both a strong financial and sustainability performance. At present, Triodos Research screens companies on sustainability criteria and maintains the investment universe. A third-party asset manager, Delta Lloyd Asset Management NV, determines which companies in this universe to invest in based on expected financial returns.

In March this year, Triodos announced that it is going to insource the asset management of the funds in 2018. The analysis of companies from a sustainability and financial perspective will from that moment on be done in the same team resulting in more synergy in the analysis and an increase in positive impact. Intensified engagement is also high on the agenda. Leading the changes of the team is Hans Stegeman, Head of Research and Investment Strategy. Hans shared his vision in a Q&A session.

What changes do you expect the integrated investment approach will achieve?

An integrated approach will change the selection process of companies for the better. We will have a more complete view of a company’s contribution to positive change because the sustainability assessment and the financial assessment will be under the same roof. It will also open opportunities to engage with companies at different levels and in different ways. It’s a welcome and exciting change for us.

Does this mean that the Triodos minimum standards will change?

No, not at all. We will not change our minimum standards in any way, so the decisions we make about sustainability performance of companies won’t change and our standards will remain among the strictest in the world. The integrated approach simply means that we can look at new ways of being more effective in our selection process. I expect we will be able to streamline our decision-making and determine sooner if a company is suitable for investment or not.

Will the actual investment decisions change?

The fund managers and investment analysts will work closely together, so the investment decisions will also be integrated. By that I mean, not only will the decision about suitability of a company be integrated, but also the decision about the extent of any investment. This may lead to different choices than Delta Lloyd Asset Management currently makes.

The press release about the integration refers to ‘intensified engagement’. What does this mean?

Triodos has always engaged with companies, mainly challenging them on our minimum standards. The integration will absolutely intensify our engagement efforts. The quality of dialogue will improve because we will understand the full business models of the companies, and not only from a sustainability perspective. We will be a more interesting sparring partner, because we know what they do well and what their challenges are in terms of sustainability and financial processes and performance. It will also change in terms of the people we will have at the table, which will lead to different questions being asked.  If we are our own asset manager, it means we can have fund managers and sustainability analysts talking to the companies at the same time. In response, the companies are also likely to have different people at the table, not only sustainability or corporate social responsibility specialists, but chief executives and chief financial officers instead.

I think the integration will also allow us to be more effective in encouraging sustainable business and to increase our positive impact. Not only do we want to raise specific issues, but we also want to challenge companies on their vision of what sustainability is, shift them away from the common way of thinking. But we will also continue to see engagement as a two-way dialogue. Having engagement at this high level can help us shape our own vision on future investments, for example in different sectors, or even stimulate us to develop new themes or funds.

You mention encouraging a shift in thinking and acting on sustainability. What do you mean?

We see a shift in acting on sustainability happening. A lot of companies take sustainability seriously in the core of their business model. We see frontrunners who do no longer think about their business model only in terms of financial returns but look at value creation from a broader perspective. More and more firms are connecting their impact to the Sustainable Development Goals or use some kind of integrated reporting to show their impact.  We see companies shifting from shareholder driven short term oriented models to stakeholder driven models, taking into account the effects of their businesses for all parties involved. We invest in those frontrunners that guide us to a transition to a sustainable world. Together with companies we want to speed up this transition by setting examples, engage with other companies and steer on concrete targets for change.

For more about the integration see the press release in which it was announced.

Hans Stegeman succeeded Rosl Veltmeijer, who was Head of Triodos Research for 16 years. As of September 2017, Rosl has taken on a new challenge and is now active in the SRI team as Portfolio Manager. 

Note: The issues explored in this article are relevant for sustainable investments on the stock market. Triodos Bank believes that our socially responsible investments are a powerful means of promoting our values and working for greater sustainability, while enabling us to offer a complete range of attractive investment options to customers who choose to invest on the stock market.

Active engagement to improve living wages

Today millions of workers, who produce our clothes, shoes and phones, earn a wage that barely sustains them. What they need is a living wage that allows a decent livelihood, taking care of housing, food, healthcare and other basic needs, and the means to support children and education. In 2016, Triodos started to actively engage with textiles and apparel companies on this topic.

Engagement report