Impact investing risks being undermined by greenwashing, says Robeco 


Dutch asset manager Robeco has raised its concerns that genuine impact investing is being undermined by “those who claim to be participating in it for their own public relations purposes”.

Impact investing has surged in recent years as investors look to make a positive difference in the world, alongside earning a financial return. 

In the UK alone, social impact investing has grown six-fold over the past eight years, increasing from GBP830 million in 2011 to over GBP5.1 billion in 2019, according to Big Society Capital’s latest estimate of market size. 

Masja Zandbergen, Robeco’s head of ESG Integration, notes that this popularity broadened the world of ‘impact investing’ to include asset classes such as listed equities and credit. While this growth is a “good thing”, Zandbergen says that certain aspects of impact investing are “less clear in the listed space”.

“What now keeps me awake at night is the prospect of genuine impact investing being undermined or demeaned by those who claim to be participating in it for their own public relations purposes, or those who simply misunderstand what it is. And with those I also include our own organisation. We need to be awake and aware of this issue,” says Zandbergen.

As impact investing has grown, so have concerns over the integrity of so-called sustainable investments. Greenwashing has been identified as investors’ biggest concern when it comes to responsible investing, according to a recent survey by investment management firm Quilter. Investors were more concerned by investments not being what they claim to be, than by the potential for higher fees or worse performance from ESG funds compared to traditional investing.

“Greenwashing threatens to undo all the good work and progress that has been made so far in responsible investing. It is crucial that fund groups invest in the way that they say they will, so it is important investors hold them to account on this,” said Eimear Toomey, head of responsible investment at Quilter Investors.

In February, DekaBank was threatened with a lawsuit from the German consumer protection agency over the sustainability claims of its impact equity fund. The bank avoided legal action by removing an “impact calculator” that had been used to market the fund on its website.

Zandbergen says that asset managers “need to be careful in our wording” when representing the impact associated with their funds, adding that regulators are beginning to police these statements more actively.

“In the US, the SEC regulator now flags ‘potentially misleading claims’ by fund managers over the claimed use of sustainable investing, while new regulations in the EU under the Sustainable Finance Disclosure Regulation (SFDR) will police this arena more thoroughly,” says Zandbergen.

Robeco’s impact investing offering accounts for 12 per cent of the firm’s total EUR 176 billion assets under management, through strategies dedicated to themes including sustainable water, smart mobility, circular economy, and gender equality.

As investors in listed equities and bonds, Zandbergen says that Robeco is usually not “providing additional capital to companies”. This is different from traditional impact investment, which goes toward projects with a clear impact in areas such as water, renewable energy, microfinance and agriculture in developing countries.

Instead, impact investing in the listed space means allocating toward companies that “create an impact versus the status quo”. 

Robeco gives detailed explanations and estimates of the impact of companies in their portfolios at the fund level. However, the asset manager says it is important to make clear that these impacts are “caused by investee companies and therefore being ‘associated with’ the fund, rather than being caused by an investment in the fund”. 

Measuring the impact of a company can also be a tricky task in the listed space, since the market is dominated by large, diversified conglomerates.

“The additional impact of companies that have one product or provide a single service is easier to determine, but still requires research, as their activities can still do harm,” says Zandbergen. 

“Think of a solar panel company that does not take care of the environment, has no respect for labour standards in the supply chain, or does not take care of its waste. On the whole, it would have a net negative impact on society and the environment.”

Robeco aims to invest in companies that derive more than a third of their revenue from contributing to one or more of the goals, and do no harm in the other part of their business. The asset manager also gives extra credit for companies that are active in underserved markets based on the Human Development Index.

Investor initiatives are also attempting to create standards for measuring impact. In May, the Global Impact Investing Network (GIIN) released a new ‘Compass’ methodology that allows investors to compare and assess impact investments. 

In the introduction to the methodology, GIIN said that investors remain “woefully under-equipped to address impact in decision-making”, and that Compass aims to make progress toward impact benchmarks, ratings, and other tools that could help develop impact investing.

“As client interests grow, so will the demand for impact investing, and we need to make sure we keep critical towards our approach and communication,” concludes Zandbergen.