Emagazine: Spotlight on Europe

In this issue

NAVIGATING CHOPPY WATERS Page 8 HOW FAST CAN A SAILING BOAT GO?

Page 10 WHAT EUROPE CAN LEARN FROM SWEDEN

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SPOTLIGHT ON EUROPE A collection of articles to commemorate Robeco’s sponsorship of the Volvo Ocean Race MAY/JUNE 2015

CONTENTS 3 Foreword 4 Rising like a phoenix from the ashes 6 Lessons from ‘a lost decade’ 8 Navigating choppy waters 10 How fast can a sailing boat go?

12 What Europe can learn from Sweden 15 Europe leads the way in sustainable investment 16 Contact

For professional investors 4-11 October

Alicante

14-15 March

Auckland

14-17 June

Lorient

15-19 November

Cape Town

18-19 April

Itajaí

19 June

The Hague (Pit Stop)

2-3 January

Abu Dhabi

16-17 May

Newport

27 June

Gothenburg

6-7 June

Lisbon

7-8 February Sanya 2|

FOREWORD The Volvo Ocean Race has finally gone full circle as the boats arrive in Portugal almost nine months after leaving Spain. With most of the race now over, there are two more short hops to France and the Netherlands before the exciting race to the finishing line in Sweden.

And what a race it has been! Our sponsored boat Team Brunel has kept up the pressure all along, and is now aiming for a top-three finish on the podium in Gothenburg later in June. The brave boys avoided some of the mishaps that befell other teams but still lost three sailors to injury along the way. It just shows how the dangers of the race cannot be underestimated.

To commemorate the Lisbon, Lorient, The Hague and Gothenburg stopovers, we are pleased to publish our eighth magazine, focusing on Europe, as well as some stories directly from Team Brunel. In doing so, we return to the theme of the very first edition – the many parallels between investing and sailing. In this edition we feature a double interview with Kommer van Trigt, portfolio manager of the flagship Rorento Total Return Bond fund, and Team Brunel skipper Bouwe Bekking, on how both have navigated choppy waters, in the recent bond market turmoil and while at sea.

Europe and the Eurozone have been recovering after the debt crisis and recessions almost spelled

the end of the euro. But are there now two Europe’s – a wealthier north and a poorer south? Our chief economist Léon Cornelissen takes a look at what the EU countries can learn from the Scandinavian model, while strategist Peter van der Welle sees Spain and Italy rising as a phoenix from their ashes – at different speeds, though.

For our regular focus on quantitative investing, Pim van Vliet, portfolio manager of European Conservative equities, explains how a low-volatility approach can benefit investors worried that the region may be heading for a ‘Japan scenario’. And Nicolas Bénéton, sustainable investment specialist in Paris, explains how Europe has come to be the undisputed leader in sustainability investing.

Finally, in our latest race report, we ask just how fast modern racing boats can go. Sailors of old used to spend weeks or months crossing the Atlantic; Team Brunel and its competitors will do it in little over a week. Part of the reason, you may be amazed to read, is it is possible to sail faster than the wind blows, though safety will always come first.

We hope you enjoy our magazine and will continue to follow the race with us to the finish in Gothenburg.

Roderick Munsters Chief Executive Officer Robeco |3

‘The inefficient banking sector is hobbling the Italian economy’ 4|

RISING LIKE A PHOENIX FROM THE ASHES Peter van der Welle While the spotlights are still on Greece – as an escalation in various forms could still occur any day – two other large southern European economies are finally showing signs of recovery.

Time is ticking away for the Greeks in this complicated game of chess with the European Union, whereby the ECB insists on putting a little pressure on both parties every now and then.

Ultimately, a compromise appears unavoidable but both the Greeks and Europe are trying to force the other party to make another concession. Due to the strong focus of the media, politicians and investors on the Greek problem, the courageous efforts of two other southern European economies that are attempting to rise like a phoenix from the ashes, are going nearly unobserved.

“Italy, the third economy of Europe, showed a ‘growth’ of 0.0% in the first quarter of 2015 compared to 2014 and that was considerably better than the consensus expectation, which was a continuation of the recession,” according to Peter van der Welle, strategist at Robeco. Italy is gradually recovering from a very long recession, but it is doing that at a slower pace than, for example, Spain.

“Italy is facing structural productivity problems, and these have been aggravated since the financial crisis,” according to Van der Wellle.

Bad loans

economy in particular is able to profit from the monetary easing by the ECB. The lower interest expenses are a stimulus for the Italian corporate sector in view of the relatively high leveraged funding. The weaker euro also has a positive effect, especially for the industrial northern part of the country, he says.

Overregulation on the part of the government is an impediment to innovation. In addition, the inefficient banking sector is hobbling the economy.

“Banks have a lot of bad loans on their books and, as a result, insufficient funding is available for the SME sector. This puts the brakes on investments and innovation, whereas it is exactly the SME sector that is the motor of the economy,” Van der Welle says.

Quick action

This is one of the large differences compared to Spain, Van der Welle observes. “In Spain, the government proceeded more rapidly with the recapitalization and restructuring of banks; bad loans were partially relocated to an institution that was founded especially for this purpose, and lending to enterprises is increasing again. Nevertheless, there is also hope for Italy, as Prime Minister Renzi is now tackling the problems in the labor market.

“The regulations governing dismissals will become more flexible,” says Van der Welle. “These measures were received enthusiastically by the EU, the sentiment on the labor market is improving and that has a positive effect on consumer confidence and consumer spending.” In addition, the Italian

Whereas Italy only just managed to rise above a zero growth rate in the first quarter of 2015, the Spanish economy grew by no less than 2.6%. The relatively quick action that was taken to deal with the problems in the banking sector appears to be bearing fruit now. Spain also took measures sooner to reform the labor market than Italy or Portugal.

Wages decreased due to the decentralization of wage negotiations, improving the competitive position. “Unemployment has decreased from 26.3% in 2013 to 23% now. This is still high, however I do think that they have really reached the turning point now”, Van der Welle observes.

“The economic momentum in Spain is better than in Italy, companies have more meat on their bones, banks are profiting from the rising employment

as a result of which defaults on mortgages are decreasing and house prices are rising. While house prices had decreased by 30% in the fourth quarter of 2012,” says Van der Welle, who foresees a further improvement in Spain for the rest of 2015.

Italy appears to be slowly recovering from the economic downturn, whereas Spain has progressed quite a bit further on the road to recovery. However, both economies are still vulnerable to setbacks. Italy in particular could experience a relapse if the ECB’s stimulating measures, which are still concealing a lot of pain, should dry up. Nevertheless, there are still political risks in Spain in view of the radical leftist Podemos party, although its ascendancy is waning. However, both countries appear to have left the worst behind them. And that is, after a number of very bleak years, simply good news.

This publication is intended to provide investors 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.

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EUROPEAN LOW-VOL STOCKS: LESSONS FROM ‘A LOST DECADE’ Pim van Vliet Europe has seen a modest pick-up in economic growth in the first quarter, with unexpectedly strong figures coming in from France and Italy. But the region still faces an environment characterized by low interest rates with low expected economic growth and low inflation. This environment resembles the scenario Japan faced in the 1990s. What are the lessons for investors in low-volatility European stocks?

Despite the ‘green shoots’ of higher economic growth’, the long-term outlook for growth in Europe remains unfavorable, because the continent is facing a shrinking population, while doubts still linger about the future of the Eurozone. Discussions about the impact of a possible Grexit - and even a Brexit - are clear signs of this.

Given the macroeconomic backdrop of low interest rates it’s perhaps not surprising that investors are aware of a possible return of increased stock market volatility while maintaining a focus on dividends.

Since low-volatility stocks have a lower risk and the companies tend to have more stable cash flows, investors might wonder how these stocks perform in an environment of low or very low bond yields.

Pim van Vliet, portfolio manager of European Conservative equities, has looked at a country that has faced similar market circumstances in the past: Japan. Because bond prices around the world have fallen considerably since 2012, his research has become more relevant. His sample period includes the time after the Japanese asset price bubble’s collapse within its economy. This period is

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sometimes called ‘the lost decade’ by the Japanese.

Together with researcher Simon Lansdorp, he reviewed the data of this country during the period 1986-2011, when the median level of Japanese interest rates was only 1.86%. He split the 26 years of data in two groups of equal size: one with relatively low bond yields, and one where they were relatively high.

The low-growth and low bond yields environment was unfavorable for Japanese equities: returns for the market capitalization weighted index were negative with -2.3%. Returns for an enhanced lowvolatility strategy were +5.6%, considerably higher than a generic low-volatility strategy, which returned +2.3%.

a low-volatility stock, which in the long run seems not to be the case.”

European Conservative has a dividend yield which is considerably higher than the market. The strategy offers a dividend yield of 4.0% versus 3.2% for the MSCI Europe Index. The Japanese experience is relevant for Europe, argues Van Vliet.

Low yield favors low-volatility stocks Protection against low equity returns In his research on the performance of Japanese stocks, Van Vliet compared the performance of three strategies: a generic low-volatility approach, an enhanced low-volatility approach, and the market-cap weighted index. An enhanced approach, which resembles the Conservative strategy, includes momentum and valuation factors to increase return.

“For Japanese equities, we found that the two lowvolatility strategies offer protection against very low equity returns which occur during periods with low bond yields,” says Van Vliet. “Moreover, an enhanced low-volatility strategy generates higher returns than a generic low-volatility strategy, as is also the case during periods of high bond yields.”

“The strong performance of low-volatility stocks during times of low bond yields makes sense,” says Van Vliet. “Let’s consider the main drivers that determine the price of a stock. This price can be seen as the present value of future cash flows in the form of dividends available for shareholders. A lowbond yield scenario has a two-fold effect on these drivers, which favors low-volatility stocks.”

“First, a low bond yield translates into a low discount rate, which would push up equity prices.

Second, a low yield signals low GDP growth and low inflation, and thus lower growth in future cash flows. Low-volatility stocks tend to have higher dividend yields of 1-2% and lower discount rates of -1% to -2%. This means that the average stock should have up to 4% more structural growth than

“It is not feasible to fully project the recent Japanese experience because many differences exist between Europe and Japan. Still, historical scenarios could give an indication of how certain strategies will likely perform under similar conditions.” An enhanced low-volatility strategy might be prudent given the current economic environment and the geopolitical political risks, he concludes.

This publication is intended to provide investors 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.

‘The Japanese experience is relevant for Europe’

Brussels

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NAVIGATING CHOPPY WATERS Kommer van Trigt and Bouwe Bekking Investing is often compared to sailing as both involve navigating choppy waters – and fewer financial markets have been choppier in recent weeks than bonds.

Bond yields had fallen for many years, as interest rates repeatedly hit historical lows, and as quantitative easing programs kept up demand for government debt. As bond prices move inversely to yields, their values had consistently risen, earning attractive returns for investors. However, yields began rising again sharply in early May, causing their values to fall.

‘More and more investors thought that the European bond market could only go in one direction’ Kommer van Trigt

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And for Team Brunel, the race has also produced some ups and downs. The team has avoided major accidents that befell other teams, but still lost three crew members through injury, and had a wobble when their boat hit a giant fish in the Atlantic. The battle is now on for the Dutch boat during the final major leg across the Atlantic to secure a top-three ‘podium’ finish.

“The bond market was in turmoil during early May; many bond funds saw their profits from the first four months of the year evaporate in just a handful of trading sessions,” says Kommer van Trigt, manager of the flagship Rorento total return bond fund “There are two main factors that could explain it. The oil price has been rising again for a while

now. Its earlier sharp declines had led to lower long-term inflation expectations, which triggered central banks either to carry out another round of rate cuts or to implement quantitative easing.”

“The second reason is less fundamental in nature, but perhaps more applicable to the sharp reversal of early May, during which the yield on 10-year German government bonds rose from 10 to 70 basis points. More and more investors thought that the European bond market could only go in one direction and were positioned for even lower rates.

This high degree of consensus made the market ripe for a correction.”

Staying afloat in all weathers For Bekking, staying afloat in all weathers is what it’s all about. “Luckily throughout the race we didn’t have many scary moments: the guys are so well trained and professional that they know what they are doing, and know where I lay the boundaries,” says the veteran captain, who is competing in his eighth Volvo Ocean Race.

“But we had a couple of scares in the build-up

period. I’ve never shouted at anyone, but I always say to a guy if something stupid happens that I have a responsibility for him and his family, and that the person should realize that if something happens to him, it affects the whole team.”

Bekking says the choppiest waters were, as expected, in the Southern Ocean around the notorious Cape Horn. “The most breeze that we have seen so far came just after Cape Horn, in a force 8-9 gale, and the sea was terrible. The Sargasso Sea was also a nightmare because of the enormous amounts of seaweed.”

Both men can draw on their vast experience to know that if things to do turn sour, things have been worst in the past. As the bond market undergoes a shakeout, Van Trigt feels it is still too early to start making comparisons with 1994, the ‘annus horribilis’ when yields rose dramatically and bond values plummeted. Neither does he think that the ultimate bear market for fixed income has begun. “In 1994 the crisis was triggered by a change in policy of the US central bank. At that time, the Fed, fearing a rapid rise in inflation and

wanting to ensure it did not end up ‘behind the curve’, hiked interest rates aggressively,” he says.

“This is not the case now. Inflation is still well behaved. Yields are mainly rising at the long end of the curve and as yet there is no fear of overhasty intervention by the Fed or the ECB. The consensus now is for a rate rise by the Fed in September, but we think that the market is underestimating the likelihood of this being delayed further.”

Canary in the coal mine There is also little sign of wage inflation, which can trigger rate rises to combat the inflation that it generates, Van Trigt says. “That’s unlikely in Europe anyway, because the growth there is still in the very early stages. If wages rise significantly, it will happen in the US and the UK first. In a complex world full of data, this is the canary in the coal mine.”

Bekking says planning and experience is key to handling short-term turbulence to attain a longerterm goal of getting the best returns – in his case, trying to win a nine-month around-the-world

ocean race. “I think experience is what counts in the long run in this race, as well as preparation.

We had an excellent few months before the race.

With experience comes the ability to make the right calls; when to slow down or not,” he says.

“I don’t think that we made many mistakes during the race; sometimes we just missed out on a first place in a leg, maybe through the luck of the draw.

If I could change something for the next race then it would be to have a bigger shore crew, as the sailors didn’t get much rest during the stopovers.”

Such is the risk to the sailors that only four of the original seven who began the race will finish it.

Three were injured during the race and one was hospitalized, requiring back-up crew members to step in. “All the replacements were due to injuries, and the people who did come in very often could only commit to do one leg,” says Bekking. “But I think all the replacements fitted in extremely well and they did all a good job. We actually learned some tricks from them as well, so the ‘fresh blood’ was actually a good thing for our team.”

The ‘fresh blood’ theme is actively practised by Van Trigt, who can use the flexibility of the Rorento Total Return Bond fund to buy bonds that are less sensitive to interest rate movements to generate returns. He sees the market correction primarily as a wake-up call for investors, requiring them to think more about diversifying their portfolios as buoyancy for rough weather.

“Generating returns will be more challenging than it has been in recent decades. What you need is a global investment universe and a flexible, benchmark-unaware investment style,” he says.

This publication is intended to provide investors 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.

‘If I could change something for the next race then it would be to have a bigger shore crew’ Bouwe Bekking

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HOW FAST CAN A SAILING BOAT GO? Timo Hagoort In the olden days, sailors took weeks or even months to cross the Atlantic.

The Volvo Ocean Race competitors will manage the 5,000 km crossing in just over a week – so just how fast can modern sailing boats go?

All boats are limited by the laws of physics on their maximum possible speed, though advanced engineering makes it possible to squeeze more power from the design of the hull. And it is actually possible to go faster than the wind, if the sails are set at a certain angle.

“Modern hulls these days can go up to 40 knots (75 kph), though the multi-hulls can go faster,” says Timo Hagoort, Team Brunel’s ‘all-rounder’ sailor, who replaced the injured Gerd-Jan Poortman after the leg to Newport. “There’s a maximum wind speed though where you have to stop pushing the boat for safety reasons, and it depends on the sea state as well. You could go at 40 knots on flat water and be fine, but if the sea state was horrendous you would want to depower, take down as many sails as you can, and just stabilize the boat.”

Flying through the water So does going faster mean it is riskier? “Again, it depends on the sea state, but the important thing is to retain control,” he says. “If you go fast and remain in control, then it is fine, but if the boat starts to take control over you, then you have to get

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your feet off the pedal and shift back.”

Volvo Ocean Race competitors use the VOR65 boat, which is 65 feet long (just over 20 meters) long and has a ‘rig height’ (to the top of the main mast) of 30m. The proportion of the hull that sits in the water – the ‘waterline’ – sets the maximum ‘hull speed’. If the boat tries to go faster, any extra speed simply creates more waves that generate water displacement and slow it down. They average 600km per day, or about 25kph.

“There is a formula for boat speed which is similar to the factors for flying,” says Hagoort. “In sailing, the most important factor is the length of the waterline, which limits the top speed of the hull.

Then there are many other variables relating to the laws of physics that control the speed.”

In order to go faster, there should be as little of the hull in the water as possible. The current speed record for a sailing boat is 65.5 knots (126 kmh), set

by Australian Paul Larsen in Namibia’s Walvis Bay, in 2012. He used a specially designed catamaran which used two tiny waterlines, effectively resembling a jet ski.

Beating the wind It is also possible to go faster than the prevailing wind. “If the sails are set at an angle of about 30-40 degrees against the wind, then the force created can propel the boat forward faster than the actual wind speed,” says Hagoort. Subsequently, Volvo Ocean Race competitors usually set their sails obliquely against the wind, rather than fully facing it, to maximize propulsion.

One man who has already set a world speed record is new crew member Adam Minoprio, a former world champion in Match Racing, a competition of shorter in-port races. “It will be a fast trip,” says the New Zealander. “We’re in third place, so we’ll need to push the boat really hard to try to catch the two boats ahead of us. Team Brunel wants me to bring a fresh perspective to the boat and push a little bit harder. It’s a young team now – we might just have the youngest team in the race – so it’s all going to help.”

‘There is a formula for boat speed which is similar to the factors for flying’

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WHAT EUROPE CAN LEARN FROM SWEDEN Léon Cornelissen Sweden is an ordinary Western European country, but one that does just that bit better, according to Robeco’s chief economist, Léon Cornelissen.

Nothing tops Sweden. In geographic terms, clearly, not very much does. But this Scandinavian country is also often held up as an example of how to do better. And not by just anybody – economists Brad DeLong and Paul Krugman, for instance, referred in 2008 to the Swedish approach to tackling a financial crisis as exemplary. Cornelissen puts it this way: “What the Swedes did was to apply a pureblooded Keynesian approach.”

In the early 1990s, Swedish banks ran into major problems when the bubble in the housing market burst. However, the approach taken by the Riksbank was very different to the method used to deal with these problems in the US and the European Union in recent years. “Shareholders were expropriated, leaders of banks that were being recapitalized fell, and managements were replaced.” There were no makeshift solutions and no ‘Japanese convoy system’ as Cornelissen calls it, where the strong hold up the weak. “Assets were packaged and sold at a discount and removed from the balance sheet.

The banks went on as ‘new banks’.”

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Better than ordinary At the same time, the budget deficit increased rapidly. “A period of crisis is not the right time for austerity. True, the government deficit increases, but that can be brought down again in the course of time.” What helped the Swedes, of course, was their own currency, which the country still firmly embraces now as an EU member and which absorbs the shocks. Cornelissen characterizes Sweden today, 20 years after its banking crisis, as a major industrial power with growth that exceeds that of the Eurozone (just above 2%). This can be attributed to the high degree of participation in the employment market, above all by women; the extended pensionable age; the large number of immigrants; and a social security system that focuses on reintegrating those out of work into the employment market.

However, some of these advantages also have a downside. The high level of immigration in recent years has led to riots in Malmö and Stockholm, and the political tensions in this area follow a trend here that can also be observed in other countries. Thus growing income inequality has also increasingly become a source of unrest. “In Sweden we can

see the same trends as in the EU. It’s just like any ‘ordinary’ Western European country, only in many areas the Swedes do things that bit better.” This doesn’t mean that there aren’t risks involved.

House prices have risen rapidly, with the danger of a new bubble ahead. Deflation is also a latent danger, certainly with the low price of oil and falling transport costs. The country has a negative deposit interest rate (-0.25%) that can easily fall still further.

Visit a sauna Cornelissen sees a very different story in other Scandinavian countries: “Finland is suffering from the Nokia effect. This company was once worth 40% of the Finnish market’s capitalization, but has now fallen into decline. In addition, the sanctions towards Russia are having a higher-than-average effect on this country. On top of that, Finland is fully dependent on Russia’s gas – a far from pleasant situation to be in, considering the increasing war rhetoric in that country.

Cornelissen is not particularly impressed by Denmark either: “The situation there is a bit schizophrenic, as the country’s currency is linked quite tightly to the euro.”

Can the rest of the EU learn from the Swedish model? Cornelissen certainly sees a few lessons to be learned. “The first of these is women’s significant participation. Sweden and Norway, as egalitarian societies, are front-runners in this field.

They have excellent parental leave schemes. In addition, they have a high-quality industry and a strong civil-engineering culture – a trump card for any country. And their own currency is an important instrument for economic policies. Swedish companies have a culture of ‘one for all and all for one’, low in hierarchical thinking and notions of class and status. Maybe, like the Swedes, we in the Netherlands should visit a sauna more often: this is where all the barriers come down and everyone is on the same footing.”

This publication is intended to provide investors 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.

‘Sweden is just like any ordinary Western European country, only in many things a bit better’

Stockholm

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VOLVO OCEAN RACE Facts & Figures – This is the 12th edition of the race, and the 5th under the name Volvo Ocean Race – The Netherlands and Sweden (Volvo’s home country) have the strongest history in the race in terms of the number of teams and sailors taking part – 7 teams are in this edition, including the first women’s team (Sweden) in over a decade – Each boat has 8 sailing crew and one on-board reporter – Some 22,000 corporate guests will be invited at stopovers and other hospitality events by sponsors of the race and the teams – The total TV audience is expected to be 1.65 billion people, on a par with the Olympics and World Cup

‘Europe remains the absolute leader with a 64% market share in sustainable investment’

The teams in the race are: – The Netherlands: Team Brunel – Abu Dhabi: Abu Dhabi Ocean Racing – China: Dongfeng Race Team – Sweden: Team SCA (all-female) – America/Turkey: Team Alvimedica – Spain: Team España – Denmark: Team Vestas Wind The other sponsors of Team Brunel are: – Brunel: project management, staff secondment and consultancy – Schouten Global: training and development – Moduleo IVC: premium vinyl flooring – Sub-sponsors: Gaastra (teamwear); Ernst & Young (accountancy)

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EUROPE LEADS THE WAY IN SUSTAINABLE INVESTMENT Nicolas Bénéton Sustainable investing is growing rapidly. Although it has been growing fastest in the US over the past two years, Europe remains the undisputed leader, says Nicolas Bénéton, Sustainability Investment Specialist for Robeco France.

Concepts such as board accountability, community relations and natural capital scarcity have become part of the global financial language.

The sustainable investment (SI) field, i.e. an approach that considers environmental, social and governance (ESG) factors, has shown accelerated growth in recent years. ”From a niche status it has now become a fully-fledged investment theme spreading to all asset classes and leading to increased awareness among mainstream investors,” says Bénéton.

The global SI market increased from USD 13.3 trillion at the outset of 2012 to USD 21.4 trillion at the start of 2014 (+61%), and from 21.5% to 30.2% of professionally managed assets, according to Global Sustainable Investment Alliance. Over this two-year period, the fastest growing region was the US, although Europe remains the absolute leader with a 64% market share, twice that of America.

How to explain Europe’s leadership? After all, the US has as much as USD 36,715 trillion in global assets under management, versus 23,143 trillion for Europe, and was a pioneer in ethical investment

with the exclusion of ‘sin stocks’ as early as the 1920s. On top of that, the US has witnessed a fair number of scandals that struck investors over the past two decades, such as the Enron fraud, the Deepwater Horizon spill in the Gulf of Mexico, and the subprime crisis, to name but a few.

bribery matters. It has also submitted a proposal to increase the level and quality of engagement by institutional investors and asset managers with investee companies in order to tackle corporate governance shortcomings and excessive shorttermism.”

European leadership

“Finally, Europe’s asset owners increasingly acknowledge the potential materiality of ESG issues in terms of both risk management and contribution to sustainable development,” says Bénéton. Here, French and Germany investors are clearly the top markets in terms of assets (EUR 1,900 billion and EUR 1,200 billion respectively, according to Novethic). Dutch and Scandinavian investors who are more pension-fund driven are increasingly stressing financial performance and risk management when asked for the rationale of their investments in sustainability.

Bénéton sees three main reasons for Europe’s lead. “First of all, European investors are more diverse in the various countries, have adopted a broader range of sustainability approaches, and are therefore imposing a wider definition of SI,” he says. “It is generally accepted that the Nordics favor exclusion-based approaches, while France considers best-in-class as the most effective way to invest responsibly. Attitudes toward corporate engagement and thematic investing also diverge.

This enlarges the asset base for SI in Europe.”

“Europe also benefits from a positive development context,” Bénéton continues. “In 2014, for example, the EU took a major step towards requiring major European companies to report on environmental, social, employee, human rights, corruption and

SI frontiers are moving And SI is in constant evolution. The latest significant trend in 2015 is impact investing. This comprises targeted investments which are aimed at generating a measurable positive impact,

either on the environmental side (reducing carbon emissions) or from a social standpoint (improving occupational health and safety conditions). Still small in size, this approach is definitely gaining traction in the run-up to COP21, the UN Climate Change Conference, to be held in Paris at the end of the year.

“At Robeco, we are convinced that taking ESG criteria into account results in better-informed investment decisions and is necessary to fully grasp the risks and opportunities that are associated with the businesses in which we invest,” Bénéton concludes.

This publication is intended to provide investors 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.

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Robeco Coolsingel 120 3011 AG Rotterdam The Netherlands T +31 10 224 1 224 E robeco@robeco.com I www.robeco.com

Important information This publication is intended for professional investors. It is intended to provide investors 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. 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. Robeco Institutional Asset Management B.V. has a license as manager of UCITS and AIFs from the Netherlands Authority for the Financial Markets in Amsterdam. The prospectus and the Key Investor Information Document for the Robeco Funds can all be obtained free of charge at www.robeco.com.

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