NNIP: asset managers have key role in ‘financing change’

NNIP noted that ensuring there are sufficient investment strategies to fulfil clients’ responsible investment needs in the post-Covid world was necessary.

The asset manager said in its ‘Responsible investing report 2020’ that the boundaries between financial and environmental, social and governance considerations were becoming increasingly blurred, adding that a greater focus on improved ESG data would enable investors to better determine value creation.

The report said that as regulation becomes more rigorous, it would be essential to remain at the forefront of such developments for asset owners to make informed choices.

Companies could choose to adapt to new stakeholder preferences or risk losing out, NNIP said.

Pim Lievense, senior adviser responsible investing at NNIP, said: “Ten years ago, investors would simply check whether a manager was a signatory to the Principles for Responsible Investment. But today most managers are, so it’s no longer a differentiating factor. You have to dig deeper and there is a wealth of factors to consider.

“To illustrate that point, our own ESG due diligence of external fund managers covers more than 120 data points.”

Regarding how responsible investing strategies worked in practice, he added: “Maybe you want to reduce CO2 emissions by a certain percentage. In that case, you can have a targeted discussion with an asset manager about how they will realise that goal without sacrificing returns or adding too much risk.

“For instance, if you want to contribute to making the world a better place, you might want a manager that uses engagement and voting to nudge companies towards more sustainable behaviour.”

Mr Lievense said that asset manager selection would become easier in years to come due to new legislation.

“The EU’s Sustainable Finance Action Plan will introduce a classification system for sustainable investments, which should promote improved disclosure and transparency, helping investors to distinguish between the leaders and the laggards.”

Adrie Heinsbroek, chief sustainability officer, highlighted five trends that he expected would shape the industry.

First he said investors would focus more on financing true impact, and second that they would increasingly recognise the need for urgent climate action.

He added that cross-country collaboration on specific issues would increase; investors would use more tools to influence companies and regulation would reshape the industry.

Mr Heinsbroek explained: “Regulatory action will be a major driving force in the industry. The EU’s renewed Sustainable Finance Action Plan will require investors to show how they integrate ESG and how their investments contribute to sustainable change.

“This trend will mostly focus on Europe for now, but it will also affect companies elsewhere as European investors demand more disclosure from their investments around the world. Clients will benefit because it will be easier for them to compare products and gain more insight into how their money is being used.”

He added that NNIP expected asset managers to introduce more investment products that let investors directly participate in positive change.