The equity and bond strategies will target both social and environmental impact across nine impact themes and are being made available to both retail and institutional investors.
Belgian asset manager Degroof Petercam Asset Management (DPAM) has announced the launch of its first two impact investment strategies, the DPAM L Equities World Impact, focused on listed equity investments, and DPAM L Bonds EUR Impact Corporate 2028, focused on corporate bonds.
The open-ended funds are classified Article 9, and are being made available to both retail and institutional investors and aim to deliver a positive environmental and social impact focused across nine themes, including sustainable agriculture/ land management, sustainable finance, education and employment, sustainable nutrition, sustainable manufacturing, sustainable energy, sustainable cities/living, sustainable infrastructure and transportation, and healthcare.
DPAM L Equities World Impact, co-managed by Ignace De Coene and Mathias Talmant, targets both impact and long term capital growth through a range of global stocks aligned to what the managers described as a triple bottom line of planet, people and prosperity.
DPAM L Bonds EUR Impact Corporate 2028, co-managed by Anahi Machado and Steven Decoster, channels investments towards corporate bonds with a positive social or environmental objective and aims to generate a return and/or enhance capital by December 29, 2028.
Speaking to Impact Investor, Talmant said that the multiple climate and social crises facing the world had prompted DPAM to take a step further in its responsible investment strategy, which the company has been managing for more than 20 years.
“When you look at the journey towards achieving the different SDGs, for the majority we still have far to travel, not only in terms of meeting our climate commitments and other environmental objectives, but also in meeting key societal challenges,” said Talmant. “We hope that by launching these two strategies, we can contribute to tackling some of the greatest challenges facing humankind.”
Machado said that the yields in fixed income in particular were also very attractive today, making impact investing through corporate bond investment a ‘no-brainer’.
“From a fixed income perspective, we know we can invest into impact without giving up expected returns,” said Machado. “The majority of fixed income products haven’t been offering a yield of more than 4% for a long time and with central banks trending towards cutting interest rates, fixed-maturity date bonds offers a very attractive investment proposition for investors.”
Impact investing in listed securities
Talmant said impact investments into listed equities and bonds offered different levels of liquidity, transparency and risk compared with private equity or venture capital focused impact investments and therefore were targeted at a greater spectrum of clients.
Although he conceded that the DPAM strategies, and in particular, the equity-focused strategy would also target institutional investors, Talmant said that both strategies were accessible to a much wider range of investors, including retail investors, than the typical VC/private equity impact fund.
“We want to create a strong niche in the listed market by offering diversification across themes and with a low entry ticket to make our products available to a wide range of investors,” he said. “We believe impact investing can and should be relevant for anyone wanting to make a positive impact. Ultimately, this should be the go-to investment philosophy to allocate money sustainably worldwide.”
Impact methodology
Machado explained that the strategies’ impact themes were defined by the company’s Responsible Investment Steering Group (RISG), which oversees the strategic positioning of DPAMs products and services. The RISG includes senior representatives from across the company as well as from DPAM’s Responsible Investment Competence Centre (RICC), a team in charge of guiding the company on its commitments to sustainability.
The portfolio managers for each strategy assess each company’s alignment with the nine themes, including analysing its revenue breakdown and capex, as well as other sector specific KPIs.
Talmant explained: “Typically, we look for at least 30% of the firm’s revenue being generated from impact-related sources, but if this is not the case, we require at least half the capex or R&D spending to target positive impacts. Otherwise, we look for company or sector specific KPIs. We engage in active debates internally and with the companies, featuring a formal process to ensure both credible likelihood of positive sustainability impact and strong financial returns.”
“We want to avoid impact washing at all costs,” he added.
Machado said that from the point of view of fixed income they would not look at impact-focused projects, if the issuer itself did not meet their impact KPIs.
“We are not saying that we will exclude green bonds or sustainability linked bonds for example, but we want to focus on the company itself and their broader impact.”
Additional impact governance oversight is also provided by a Sustainable Impact Themes Operational Committee (SITOC), made up of one RICC member, the equity and fixed-income analysts covering a security or the sector and at least one of the portfolio managers, which assesses the pipeline of investments to ensure that each and every portfolio holding meets the KPIs established in the company’s impact framework and can demonstrate a convincing and sustainable impact commitment.
Social housing and timberland
One of the investments in the bond strategy is in a social bond issued by German municipal housing company Howoge. The company focuses on building and maintaining affordable housing in and around Berlin.
“Berlin hasn’t escaped the housing crisis that many cities are facing across Europe as the population grows at a faster pace. Howoge is focused on building residential properties for students and low income households with monthly rents equal to just 17.5% of the average household net income, below the 25% threshold considered as affordable,” said Machado. “Their housing stock is also more efficient than the average home, reducing the burden of rising energy bills.”
DPAM’s equity impact strategy has recently invested into Weyerhaeuser, an American timberland company, which Talmant said his team were attracted to due to their sustainable forestry management.
“They replant every tree they harvest and their wood products are made from 100% certified sustainable wood fibre, making them a best-in-class company in their field,” said Talmant, who explained the company was also developing new revenue streams, albeit at a nascent stage.
“They are also looking at maximising revenue from each acre of land by, for example, leasing land for renewable energy projects or developing carbon credits on some of their sustainably managed forests. They are also developing a carbon storage project,” he added.
