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Hugh Wheelan: So long SAM, it’s been good to know ya…

The switch of RobecoSAM to brand ‘ingredient’ heralds the wind-down of the dedicated SRI boutique, and potentially the Head of RI function across the industry.

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The announcement last week by Dutch funds giant Robeco, that its specialist RI funds subsidiary, RobecoSAM – an SRI pioneer in its original incarnation as SAM (Sustainable Asset Management) – was to be switched to a brand line within the Robeco group was the end of an era.

It also confirms a global trend: the move away from specialist RI houses. And, I think it is indicative of another: the gradual ‘internalising’ of the ‘Head of Responsible Investment’ function into a standard investment title.

These trends have great potential, and pitfalls; more of which later.

First: RobecoSAM. 

It is no longer an independent subsidiary, but now a so-called ‘ingredient’ brand, according to Robeco. It will be part of the mother company’s sustainable research capacity, and of its ‘impact’ fund range, much of which will still be managed out of RobecoSAM’s Zurich office, now named Robeco Switzerland.

From stand alone dish to ‘ingredient’… that must hurt the 90 or so employees in Zurich.

David Hrdina, who heads up things there now, has the title of Business Manager, Switzerland – no longer an executive role.

Personally, the impact fund term niggles me a bit here. I consider RobecoSAM’s funds to be sustainable thematic funds, deriving returns from companies riding clear new trends. 

Yes, there is likely ‘impact’, but for me, impact funds should be ‘impact first’; and one of the pitfalls I mentioned at the beginning of this piece is a tendency for fund managers to label sustainability-related funds in a mish-mash of ways. 

But, I digress. 

I first came across SAM, as it was then, in the late 1990s, around the time of the launch of its initial sustainability fund. 

I remember that the fund was explained to me (by a former SAM evangelist who I still keep in touch with) in a restaurant near Borough Market, just next to London Bridge; back then a relatively quiet part of central London, but soon to become a mecca for ‘foodies’. Trends transform things!

I covered the story in 1999 when SAM teamed up with Dow Jones, to create the Dow Jones Sustainability Index (DJSI). 20 years later, RobecoSAM’s extensive corporate sustainability data set was sold by Robeco to S&P; deemed to be no longer core business.

The story initiatlly was its interesting growth: the manager was a rite of passage for smart minds focused on sustainability who wanted to apply it in finance, and vice versa. There are few responsible investment professionals in Switzerland who haven’t passed through its doors these last 25 years.

Then it was Robeco’s buy-out in 2007 and subsequent business build; a bold and visionary move back then for a mainstream funds house.

Then, as CEOs changed in Rotterdam – and increasingly Zurich – it became a rollercoaster ride. A search on RI will give you much of the back story.

To cut a long story short, tensions set in when support for sustainability was less strong in Rotterdam. They emerged along the usual fault lines: sales frustrations, strategic direction, resources, attention, etc.

This can be a fragility of the multi-boutique model, which Robeco runs to a degree.

Then, something even trickier happened.

From 2016 onwards, responsible investing started to mainstream in large fund managers like Robeco, and client demand grew. What to do when you have two firms side by side increasingly doing the same thing? There was only going to be one outcome.

In the intervening years, Robeco has also launched some sustainable investment funds managed in Rotterdam under the RobecoSAM label such as Euro SDG Credits, Global Green Bonds and Global SDG Credits. And the firm seriously stands behind the overall strategy. As a result the RobecoSAM range possibly gets better marketing support than ever!

And the range could prosper: assets under management in the RobecoSAM funds have held up at €6.7bn (end of June 2020), and performance is solid. Clients are primarily banks via discretionary mandates, and this access to the Swiss wholesale market is a useful one for Robeco.

But what happens when a portfolio manager or two in Zurich move on? Does Robeco recruit in Switzerland, or do things gradually slide to Rotterdam? My experience of these things suggests the latter. We’ll see.

The backing of responsible investment by large funds houses like Robeco is a huge trend.

The massive potential it brings is greater investment, strategy, product, focus and client engagement. But, there are clear pitfalls.

Ultimately, the dedicated, specialist responsible investment houses get swallowed; to RobecoSAM add the recent buy-outs of long-standing names like Trillium and Calvert in the US. These have been among the leaders and drivers of responsible investing; is their departure from the scene a new dawn or a dilution? 

Interestingly, what we’re also starting to see is the gradual ‘internalising’ of the Head of Responsible Investment function into a standard investment title. 

During a recent panel I moderated for RI Digital Japan 2020 conference on the hottest new topics in ESG, Hans Stoter, Global Head of AXA IM Core at AXA Investment Managers, asked whether the organisations of the future would still need ESG specialists if it was a truly integrated core competence of asset management?

Axa IM no longer has a Global Head of RI following the departure of Matt Christensen to Allianz (which still does). Axa IM’s responsible investment activities (research, thought leadership, engagement, active ownership) are being centralised under Gilles Moëc, Head of Research and AXA Group Chief Economist.

That may be the right approach. In a way, that’s what Robeco is also doing. 

And the swallowing of specialist fund managers by generalists is the usual order of things. 

But the proof of real change will be in the clear definition of what responsible investing means for the investment approach and output of asset owners and managers. Terms like ESG integration for risk, active ownership, impact, etc, will need to be clearly defined and demonstrated. As will investment alignment (and influence on portfolio companies to be clearly aligned) to Paris/net zero targets, and to the increasing related regulatory drives on social and governance standards.