Adding value
It is a lot of work trying to make a difference on all fronts, but it does works.
Since the beginning of 2014, Robeco has explicitly quantified the expected impacts of material ESG issues on the value drivers in their discounted cash flow analysis. This has resulted in gaining data for more than 200 investment cases – with striking results.
While ESG information was incorporated in 100 per cent of the investment cases for the equity team, in about half there was also a direct impact on the valuation ascribed to the company due to the ESG analysis.
Furthermore, we found that on average, 7 per cent of company valuations were attributed to ESG factors. Last year, we found ESG information had a financially material negative impact on our analysis of credit investments in 30 per cent of the cases, and a positive impact on 3 per cent.
These results make sense: the equity analysts are focused on the upside potential of ESG, while the credit analysts look for downside risk indicators.
The challenge that remains is not about proving that sustainability investing adds value, both financially and in terms of benefiting wider society, this is clear. The problem is embodied within those that have signed up to support the SDGs, and more importantly, those that have not.
Many still need to be convinced that it is a worthwhile pursuit – and in their own interests. Therein lies the challenge in continuing to promote the case for a global collaboration in putting money to work to benefit those who need it most.
Masja Zandbergen is head of ESG integration at Robeco
