Active ownership fonds 2 december 2015
Robeco | Willem Schramade
For professional investors only
Onze overtuiging
# holdings
Mainstream funds
Wij geloven dat:
Prestaties van bedrijven op materiële E/S/G zaken sterk gerelateerd zijn aan hun waardedrijvers en financiële prestaties
Grondig begrip van deze relaties in iedere investering zorgt voor beter geïnformeerde beslissingen en meer verantwoord aandeelhouderschap
Active ownership Intensity of dialogue, depth of integrated analysis
Onze bestaande fondsen gaan ver..
..maar we kunnen nog verder gaan
ESG raakt aantoonbaar onze waarderingsmodellen en investeringsbeslissingen*
Langere holding periodes & commitment Actiever aandeelhouderschap, intensievere dialoog
* Zie ook de Robeco artikelen “Measuring ESG impact Part 1: valuation” & “Measuring ESG impact Part 2: decisions & portfolio” (Schramade, mei 2015) en W. Schramade, 2015, “Naar duurzame aandeelhouderswaarde”, Holland Management Review, nr. 152. 2
Wetenschappelijk bewijs Er bestaat toenemend wetenschappelijk bewijs voor het belang van E/S/G factoren en engagement: Goede prestaties op materiële ESG factoren dragen bij aan aandelenrendementen (Khan et al., 2015) Veel bewijs voor G (e.g., Gompers et al., 2004) E doet ertoe (e.g., Derwall et al., 2005) Recentelijker ook voor S (e.g., Edmans, 2011) Engagement levert performance op (Dimson et al., 2014)
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Wat betekent dit voor u als klant? Wij willen tegemoet komen aan de wens van klanten om betrokken en verantwoorde aandeelhouders te zijn, die bedrijven helpen naar duurzamere verdienmodellen te bewegen
Meer transparantie knowing what you own & why you own it
Waardecreatie die wordt vertaald in sterke rendementen
Transparantie tot op het individuele holding niveau: Current
Targets
Timeline & how to get there
Margins Growth Capital
E S G
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Waarom Robeco? De bouwstenen zijn er
Sector analysts Global Equity: integrate E/S/G factors into financial models
Governance and Active Ownership: voting & engagement
SI analysts: analysis of most material E/S/G factors
Lever group assets, reputation & coalitions PM
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Een andere, holistische aanpak
Environmental & social analysis Niet de typische SI aanpak van E/S/G analyse in isolatie, zonder financiële implicaties
Governance analysis
Niet de activistische aanpak met slechts financiële analyse en governance
Financial analysis
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Waarin we willen investeren
Solid industry quality & structure, ROIC, business model and management quality
Aantrekkelijke langetermijninvesteringen,
Waar we een actieve rol kunnen
spelen om de onderneming op koers te krijgen en te houden
Onze toegevoegde waarde: • Identificatie van relevante relaties • Rapportageverbeteringen • Meetsuggesties • Benchmarking met concurrenten en andere delen van de waardeketen
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De opzet
Kracht van de huidige fondsen
Focus op rendementsmaatstaven (ROIC & FCF)
ESG integratie inclusief aanpassingen in waarde drijvers
(ESG & sector-) kennisbasis van de analisten
Zeer actief aandeelhouderschap
Engagement begint VOOR investering
Intensieve dialoog
Verbeterplan per holding
Mijlpalen voor de meest materiele ESG factoren & financiële prestaties
Waardeer dienovereenkomstig
Vooruitgang en evolutie van het verdienmodel zijn leidend voor verkoopbeslissingen
Geconcentreerde lange termijn portefeuille
20-30 holdings Beoogde holding periode >5 jaar
Lage bèta Midcaps + ‘kleine’ large caps
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De uitvoering
Stap 5: Stap 4: Stap 3: • Investeer
• Actieve monitoring • Intensieve dialoog
• Waardecreatie • Desinvesteer
Stap 2: • Grondige case Stap 1: • Stel verbeterplan • Screening vast • Fundamentele analyse • Contact + opbouw relatie 9
Kortom
Waardecreatie op basis van ESG verbetering
Actieve & constructieve dialoog - engagement begint voor de investering
Lange beleggingshorizon met hoge concentratie
De bouwstenen zijn er
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Appendices
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Roadmap: a case study We recently engaged a Packaging company that is in the Robeco NV and Global Stars funds. The phone call and subsequent letter were structured as follows:
Explain Robeco active ownership approach
Our interest in the engaged company
Stage 1: Improve overall sustainability reporting: link between strategy, ESG factors & business model; materiality matrix; KPIs & targets
ESG suggestions to drive performance
Stage 2: reporting on specific material issues. E.g., missing KPIs on safety, supply chain management and environmental management; indicating best practices at peers and elsewhere
Wrap-up & followup
Stage 3: Advanced sustainability efforts, such as quantifying externalities through methods like true price or an eP&L
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Investment Process MSCI ACWI
1) Size & industry screening
•1-30bn market cap •Robeco exclusions list •Only sectors with decent economics (CFROI>7%)
2) Analyst fundamental scoring screen
•ESG exposures •ESG performance •Industry & Business model strength •Value driver performance
3) Case building
4) Portfolio construction
•Deeper assessment of 4 factors from step 2), •VDF Valuation •Assess performance improvement potential •Preliminary roadmap for change
•Discuss & compare in portfolio context •Preliminary engagement to assess companies’ willingness to change & set Roadmap for change •Final decision to buy or not
Global ~2400 stocks
~1600 stocks
~100 stocks
~40 stocks
~20 stocks
Europe ~1200 stocks
~800 stocks
~100 stocks
~40 stocks
~20 stocks
5) Commitment & active dialogue •Constant monitoring of improvement •Regular company contact and reporting •Exit decisions
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Avoid weak industries
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Stock Selection: How ESG* directly impacts our valuations Three step approach to quantify the impact of ESG factors:
Step 1: Identify and focus on most material issues
Mostly by RobecoSAM analyst: Deep dive into most material issues for industry & company; company performance on those issues; offers short-cuts and new insights
RobecoSAM analyst
Step 2: Analyze impact of material factors on the business model
Both analysts: Determine company’s relative performance to asses impacts on competitive positions, per issue
Step 3: Quantify to adjust value driver assumptions
Global Equity analyst’s responsibility: express the combined impact of the various material issues in a number per value driver
Better informed decisions
e.g., higher conviction; better risk-return view
Global Equity analyst
*More information about our ESG integration, including a list of recommended articles, can be found in appendix 1. The Robeco article “Valuing ESG at Robeco Global Equity” (by Schramade, September 2014) describes the method in more detail.
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Step 1: Identification of material factors – Roche example* 1
Cash and Capital Management Product Quality and Safety
Human Capital Management
0.9
Innovation management
Focus on the most material ESG factors
Likelihood of Impact
Market Access Strategy Corporate Governance
0.8
Strategy to Improve Access to Healthcare
Business Ethics
Quality of Earnings
0.7 Supply Chain Management Environmental Management & Product Stewardship
0.6
>
Materiality matrix for every industry
>
Plot biggest risks and opportunities
>
Plus adjustments at company level
Customer Relationship Management
0.5
0.4 1
1.5
2
2.5
3
3.5
4
Magnitude of Impact
Source: RobecoSAM, Robeco
* See also the Robeco article: “What are the financially material ESG factors in the Pharma sector?” (by Messina & Vanacker, March 2015) 16
Step 2: Analyzing ESG impact – Roche example Dialogue between Global Equity sector specialists and Zurich SI Research Roche ESG factor
Performance
Peer comparison
Impact on value drivers
Product Quality, Safety & Business Ethics
• An almost flawless track record on quality
Leading in the industry in both absolute and relative terms
Revenue and margin benefits from lower remediation costs, better reputation and limited liabilities
Innovation management
• Strategic focus on higher growth higher
• Leading in Oncology, • consistency in other
Better growth and profitability as cancer medicines have higher margins
and safety. • One of the lowest total amounts of fines and frequency of events in the sector
margin markets in Oncology leads to solid and consistent innovation. • R&D Productivity is increasing with strong pipeline current, proving the benefits of high commitment to research
domains, • option value created through strategic partnerships with Genentech and Chugai
Human capital management
• Lowest turnover rate; • High employee satisfaction rates
Best in group and improving further
Cost advantage
Market Access Strategy
Efforts on innovative pricing models, drug donations and patient outcome data sharing
In-line with peer group
Neutral on growth and profitability
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Step 3: Quantify the ESG impact – Roche example Explicit integration into valuation
Value driver
Sales growth
Margins
Cost of capital
Target price
Benchmark
Product market growth: 0.6%
37%
8%
CHF 274
ESG factors
Innovation management & Product quality & safety: +300bps
Innovation management & Product quality & safety: +400bps
none
+CHF 31 (+11%)
Total
3.6%
41%
8%
CHF 305
BUY
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Measurable engagement output
(Source: RobecoSAM)
Measurable engagement output contributes to ESG integration by enabling a dialogue with portfolio managers. This ultimately improves the risk-return profile of the portfolios. 19
Important information Robeco Institutional Asset Management B.V., 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.
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