Since the firm's foundation in 1995, RobecoSAM has been focusing on identifying and interpreting sustainability information, and translating it into investment opportunities. The negative and positive screening of companies on their sustainability performance forms the leading alpha driver of RobecoSAM's sustainability product offering.
First and foremost, RobecoSAM developed the annual Corporate Sustainability Assessment (CSA) in 1999 in order to identify companies that are better equipped to recognize and respond to emerging sustainability opportunities and challenges presented by global and industry trends. This proprietary assessment framework is based on criteria that have been selected and formulated by RobecoSAM analysts. The annual RobecoSAM CSA is based on approximately 600 questions. The questions cover 125 criteria across 60 different industries, and lead to roughly 1000 collected data points per company. The raw data stemming from the CSA are then engineered by dedicated team in order to remove any statistical biases in the data and to tilt the weighting of the different criteria according empirical evidence. Thus, the data are developed into a Smart ESG score. This process includes a statistical correction of unwanted biases in the original dataset as well as tilting of the weighting scheme towards criteria that have shown the strongest link to future equity performances. The testing of these advanced sustainability scores (Smart ESG scores) have shown a positive and relative stable improvement of investment returns in all major regions over the past decade.
For the sustainability core strategies, we use a kind of a "best in class" screening which is based on our annual Corporate Sustainability Assessment (CSA), to identify the most sustainable companies in each of the starting universes. In our Global and European Equities strategy for example we only keep the top 66% of companies per industry in the universe. The bottom third though is removed as our empirical testing shows a significant underperformance of that group relative to rest over the long-tern.
Second, we apply special screens on environmental data (GHG emissions, water and energy consumption, waste production) in order to improve the environmental footprint of the universe. The screening is used in a way that the environmental footprint of the universe (based on the mentioned four factors) is increased by at least 33% relative to the starting universe. We continually monitor companies in our universe for their sustainability practices, and if necessary, we will downgrade their sustainability score, which in turn will have a negative effect on the overall valuation of the stock.
For thematic strategies, RobecoSAM creates investible universe based on companies that are defined as "solutions providers" who address long-term sustainability challenges. Our equity and SI Research analysts provide investment recommendations and base those decisions on screening criteria that have been established as best practice, and which are updated on a regular basis throughout the year.
Third, the fundamental research that leads into the generation of potential investment ideas and the formujlation of recommended investment cases, the screening includes a Sustainability Materiality Analysis. This Framework defines the financially most material factors in per sector and therefore gives guidance to analyse individual companies in detail. Based on this framework, companies are screened and analysed in order to identify strength and weaknesses of companies and to isolate ESG criteria that are expected to have significant impact of its valuation. Such factors can include corporate governance practices, supply change management, innovation power and other environmental, social or economic indicators. They are an integral part in our valuation models. Companies get selected if they score favourably relative to their peers in that analysis.
On negative screening, RobecoSAM defined its policy regarding exclusion screening which includes guidelines on manufacture of damaging businesses, exclusion of government bonds from controversial countries, and exclusion of companies who violate the United Nations Global Compact principles. This policy is updated once a year or more (if necessary) and made available to the public via the RobecoSAM website.