Sustainable investment has never been so popular

Rico Fasel and Eran Habets

ABN AMRO has offered its clients the option of sustainable asset management since 2005, but never before has it been so popular. That’s why the bank is now launching Sustainable Investment Advice this autumn for investment advisory clients looking to invest in a fully sustainable way. Eran Habets, Managing Director of ABN AMRO’s Wealth Advisory and Investments, says, 'So many clients benefiting from our investment advice really want a fully sustainable portfolio. I can even imagine that, at some stage, all the bank’s investment activities will be sustainable.'

Sustainable investment is all the rage. In fact, in 2015, ABN AMRO and ABN AMRO MeesPierson’s sustainable investments totalled a record €6.4 billion, of which about €3.7 billion came from clients based in the Netherlands. Compared to 2014, capital invested by the bank in sustainable investments rose by 19%. And this upward trend is continuing in 2016.

The bank also launched sustainable asset management for retail clients in 2015. Eran says, 'We’re seeing a real uptake in this broad client segment, which means there’s a keen interest in sustainable investment. When clients opt for sustainable asset management, they effectively authorise the bank to make investment decisions for them.'

Clients receiving investment advice choose for themselves which companies and funds to invest in. Sustainable investment advice centres mainly on sustainable and ethical investment funds, meaning that it’s relatively easy to achieve a balanced spread. Eran continues, 'Clients interested in sustainable investment used to have to opt for portfolio management or specifically request that their advice be tailored to reflect their sustainability aims. We were also getting lots of questions about impact investing.' Sustainable investment advice means that only sustainable investments and impact investing are taken into account.

What is sustainable investment?

A frequent question is “What exactly is sustainable investment? And what about impact investing?” Sustainable investments target companies meeting specific environmental, social and corporate governance (ESG) criteria. An example would be a firm that uses only sustainable energy. Since the term “sustainability” is rather broad, ABN AMRO has set strict criteria to determine whether a given investment is sustainable or not. Rico Fasel, Director of ABN AMRO’s Product Management Investment Advice, says, 'A sustainable or ethical investment fund must have included the theme of sustainability in its investment strategy, which should be about excluding things like tobacco and firearms. When advising clients on specific companies, we don’t present companies with poor sustainability indicators.' The sustainability indicator is based on data from Sustainalytics, a research firm specialising in ESG and corporate governance research and analysis.

Impact investing

Impact investing is an important component of sustainable investment advice and involves clients investing in companies aiming to make a measurable, positive contribution to society or the environment – businesses specialising in microfinance or stimulating local economies, for instance. The FMO Privium Impact Fund, which invests in renewable energy and loans to the agricultural sector in developing countries, is an excellent example. Eran says, 'The fund has set impact goals in terms of employment and the reduction of carbon emissions.' Impact investing is becoming more and more popular, not just with very wealthy investors but with smaller ones, too. 'Impact investing is about ‘doing good’ and generating a healthy return, a combination that appeals to many of our clients. It’s like noblesse oblige meets financial return.'