Adrie Heinsbroek on the five trends that will shape the future of responsible investing in 2021

Adrie Heinsbroek, Chief Sustainability Officer at NN Investment Partners, talks to Climate Action about the five trends that will shape the future of responsible investing in 2021 and beyond.

Has COVID-19 refocused your client priorities?

We need to ensure that the capital we put to work in the financial markets has a positive impact in the real world. This will be one of the guiding questions for clients in the years ahead. Covid-19 has led them to focus even more on fundamental issues that are affecting human life in every corner of the world. We are seeing increased demand for green bonds, sustainable equity strategies and other products that provide opportunity for clients to directly contribute to environmental or societal change. Investors require also more transparency on the impact of their portfolios. This trend will only increase, which is why we are constantly expanding our reporting and aligning our data processes to meet client and regulatory needs.

How will asset managers adapt policies to assist companies in their transition to a more climate friendly business model?

The 2021 United Nations Climate Change Conference will increase the sense of urgency to tackle climate issues. Images of clear blue skies in the pandemic’s initial phase opened people’s eyes to what can be achieved, so I think there will be even more pressure on governments to step up their efforts. For investors, it’s crucial to take a broader view on climate. As companies transition to a more climate friendly business model, they will also face social challenges relating to job security and the skills gap. Long-term investors have to remain invested and have to support businesses as they have to take difficult but necessary decisions. If we ask companies to change, we also need to finance this change. We expect asset managers to adjust their policies to take this into account more in the future and enable the transition.

Can you drive change through engagement and dialogue?

Asset managers will increasingly join cross-industry coalitions to drive change through dialogue and engagement. Europe is taking the lead on this, but we are also experiencing initiatives on diversity in the US. By teaming up with social and governmental organizations, investors can have more impact on concrete topics that reflect clients’ priorities. A good example from 2020 is our signing of investor statements to halt deforestation in Indonesia and Brazil. This led to conversations with government representatives. Going forward, we expect to team up with many more coalitions to accelerate our sustainability agenda. We are closely following developments relating to the launch of the Taskforce on Nature-related Financial Disclosures. This is linked to the growing importance of biodiversity, a topic where we already interact with sustainability and nature conservation organizations such as the WWF and CSR Netherlands . In 2020 we asked global leaders via statements to agree on effective measures to reverse nature loss in this decade to ensure ecosystem resilience.

Will ESG become an integral part of the stewardship role of asset managers?

ESG will definitely become an integral part of the stewardship role of asset managers. So far, it has been difficult for investors to use voting to influence ESG policies, but this is set to change. In the coming years, we expect the first companies to enable investors to vote on their sustainability policies at the annual general meeting. Similar to the ‘say on pay’, companies will start including a ‘say on climate’ or a ‘say on diversity’ as a standard item on the AGM agenda. Investors will also have more ways to influence ESG policies through engagement. We will actively engage with companies as we help them transition to more sustainable business models, and we will also continue to join forces with societal organizations to drive change on specific issues.

Do you think that regulatory action can reshape the industry?

Regulatory action is currently a major driving force in the industry. The EU’s renewed Sustainable Finance Action Plan will require investors to show how they integrate ESG and how their investments contribute to sustainable change. This trend will mostly focus on Europe for now, but it will also affect companies elsewhere as European investors demand more disclosure from their investments around the world. Clients will benefit because it will be easier for them to compare products and gain more insight into how their money is being used and set to work in economy. In addition, we expect asset managers to introduce more investment products that let clients directly participate in positive change.

Adrie spoke at the recent Sustainable Investment Forum Europe and in his closing remarks he addressed the need for investors to act now as climate issues require urgent action. “The future is written by those willing to shape it and that’s what we do, let us start as of tomorrow and right the future”

You can view Adrie’s closing speech here.