ESG investing is developing fast and Asian institutions that do not move with the tide will miss out on considerable investment opportunity and returns. As such, many investment professionals now sense a shifting awareness within the investor community.
The tide is turning. Speaking in Singapore recently, Adrie Heinsbroek, head of the responsible investment team at NN Investment Partners, clearly possesses an evangelistic zeal for his chosen specialist area. He can boast two decades of hard graft during which time he has worked to enlighten investors on just why they should be investing responsibly.
Heinsbroek - in his capacity representing the Netherlands-based asset manager - externally advises clients on responsible investment policies and needs. He reinforces the case for firms to incorporate environmental, social and governance (ESG) values.
Over the years his nascent beliefs have grown from being considered obscure, left-of-centre thoughts to now being considered mainstream, especially across his native Europe and soon, he hopes, across Asia too.
“When I started 24 years ago, I was seated in a small office somewhere down the hall next to the toilets. Now we're part of the investment engine and the chief investment officer is sitting two desks away from me,” Heinsbroek says.
He is responsible for existing ESG work across research, portfolio construction and risk management of all strategies at the firm.
According to Heinsbroek, 20 years ago responsible investing was just about adhering to certain principles. He says it was just signing up to something and paying a yearly membership fee.
Times have changed, he says, and while you can still have principles and memberships, you must deliver and put the principles into practice.
He believes that Asian institutions were originally wary of accommodating the ESG element, perhaps fearing that by doing so performance would be diluted.
This misconception is being turned on its head, with many institutions now conceding that without appropriate ESG considerations investors may look elsewhere.
“People think that ESG can sometimes harm returns, but I make you aware that it actually helps to create returns. ESG information is, according to us, an enabler of returns,” Heinsbroek says.
“It can help us make better investment decisions. It helps to mitigate risks and improves the risk return profile, that's something I cannot stress enough,” he adds.
Heinsbroek is adding several new hires to his team based in The Hague. The move will allow him more time to cast his significant influence over the Asian business of NN Investment Partners.
With Asia home to emerging markets that are still dependent on coal, and societies that place supporting social stability needs over environmental concerns, Heinsbroek believes one of his most important tasks is to engage with companies which are trying to adopt ESG principles.
“For us, the most important thing about engagement is it helps us to assess the companies which are really taking the next steps to be fit for the future. It's an instrument for investment selection,” he says.
“The second thing is that it's an identifier of those companies that perhaps are slowing down or not going in the right direction, so it helps us to select the right companies and identify the ones that could be missing out on future investment,” Heinsbroek adds.
