Masja Zandbergen, head of ESG integration and Victor Verberk, chief investment officer of fixed income and sustainable investing at Robeco, have argued that investment managers should learn new skills around machine learning and sustainable investing.
A recent CFA survey showed investment industry leaders rank “T-shaped skills” as the most important future skill category – where individuals have deep discipline expertise, alongside cross-discipline knowledge.
Almost (49 per cent of respondents) ranked T-shaped skills first, followed by leadership skills (21 per cent), soft skills (16 per cent) and technical skills (14 per cent).
“We would argue that most investment professionals actually have T-shaped skills, being experts in analysing companies, but always curious and interested in the world around them,” the analysis by Ms Zandbergen and Mr Verberk said.
“However, working across disciplines comes less natural to the fund manager. To keep up with developments on the sustainability front, portfolio managers need to read up on the work of climate and human rights experts.
“Being able to use big data and machine learning to exploit behavioural biases is another skill that the future fund manager needs to have.”
Fund managers should also be shifting from focusing on ESG integration to impact, the pair stated.
“Focusing on financial material ESG issues was a good place to start, as it was closer to the heart of fund managers, and did not have any impact on their investment universe. This leaves the most room to create alpha according to the good old fundamental law of active management,” the analysis said.
“However, 10 years on, we see that our clients, the regulator and society are moving towards focusing on the actual (negative) impact our investments have. This is adding another dimension to analysing companies and constructing portfolios: return, risk and social and environmental impact.”
The ideal fund manager is expected to be able to keep on top of a carbon budget, as well as tracking error and alpha.
As Ms Zandbergen and Mr Verberk explained, the ideal fundie is “someone who understands that decarbonisation through time is a given and that negative externalities (like waste or carbon emittance) should be priced. Because policy makers will push for externality pricing, while stranded assets are the minefields of the coming years”.
“The fund manager 2.0 understands that real world impact via our investments is equally important, in some products at least, to generating alpha. Taking into account real world impact is the future,” the analysis said.
“Combining these efforts is a whole new challenge. Not adapting will make you extinct.”
