Multinational asset manager Robeco has said it will be honing in on biodiversity loss and mining safety, along with decarbonising companies and portfolios as part of its key engagement themes for the year.
The company each year selects new ESG issues to focus on in consultation with clients and investment teams.
Due to the new focus, Robeco has called for companies to develop plans to achieve zero net deforestation by 2023.
The investor also wants food manufacturers and companies that produce soy, cocoa or palm oil to conduct a biodiversity impact assessment of their operations and supply chains.
Additionally, it is also aiming to decarbonise companies to meet commitments to the Paris Agreement, which has a target of lowering global warming to 1.5 degrees Celsius above pre-industrial levels by 2100.
Carola van Lamoen, head of the active ownership team at Robeco commented investors are exposed to biodiversity loss primarily through changes to land, such as deforestation for agricultural production.
“What the impact of a specific company is on biodiversity is difficult to pinpoint. In the short term, if there are fewer bees or fewer species of birds, that’s not a big issue for individual companies,” Ms van Lamoen said.
“But if you look at this on a global scale, if we face the extinction of species, then the world will become very different. This will have a large impact on the ability of companies to produce food at the current scale of production.”
On the decarbonising theme, she added: “It is clear that climate change represents a significant threat to investments and the global economy.
“To protect against this threat, investors should align their portfolios with the goals of the Paris Agreement,” she said.
After a number of fatal accidents at tailing dams (an embankment used to store the byproducts of mining operations), the investor is also urging for improved risk disclosure as part of the Investor Mining and Tailings Safety Initiative, a global engagement programme led by the Church of England and Swedish Council of Ethics.
Around 248 people were killed when a Brazilian tailings dam collapsed in January last year.
Robeco has also stated it will be looking at water management practices.
“Existing guidelines are insufficient to prevent failures from reoccurring – and some companies have had recurring incidents,” Ms van Lamoen said.
So far, the joint initiative has contacted more than 600 companies requesting risk disclosure.
Further to biodiversity, mining and carbon, Robeco will also look at governance in emerging markets and remuneration in 2020.
The main focus for governance in emerging markets will be in markets such as Brazil, South Korea and China, Ms van Lamoen said.
“We will also look at opportunities for policy engagement in collaboration with local investor initiatives,” she said.
In remuneration, the team will engage on executive pay, aiming for it to reflect company financial and ESG-related performance and to be aligned with the interests of stakeholders.“There is renewed momentum for engagement both in the US and EU, where the new Shareholder Rights Directive II requires companies to have their remuneration policies approved by investors in advance, and to improve their practices,” Ms van Lamoen said.
“The remuneration policy of key executives should be aligned with the long-term value creation of the company.”
The five new topics have added to a new total of 23 engagement themes for the active ownership team.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].