Sustainability preference questionnaire for investors provides stimulus for product range and transparency.
We don’t have to look far for proof that sustainability and added financial value go hand in hand. In recent years, we’ve been making huge investments in energy-saving measures when renovating our homes, which ultimately increases their value. Investment opportunities can also combine social and financial returns, but this requires transparency, insight and an appropriate range of products. It is here that asset managers have an important role to play.
It is vital for asset managers to take investors' sustainability preferences into account, recommend appropriate products and give investors insight into the sustainability of their investments.
Bastijn Guns, Product Manager KBC Asset Management
Sustainability questionnaire difficult but necessary
The European Union wants to become climate neutral by 2050. To achieve this ambitious goal, it has adopted an extensive range of new laws and regulations which also impact the financial sector and investors.
‘KBC views responsible investing as a crucial part of the transition to a more sustainable world. That’s why we ask all our investors about their sustainability preferences,’ states Bastijn Guns, Product Manager at KBC Asset Management. This questionnaire is important as the answers given determine the investment advice and the discretionary asset management services that KBC will provide in future. It is far from a straightforward questionnaire, as it introduces investors to several new concepts. But even so, customers appreciate being consulted in this manner. ‘The sustainability questionnaire is required by law, but it needs to be made clearer and simpler if we want to keep investors in the loop,’ says Guns.
In addition to the questionnaire’s complexity for investors, fund managers often run up against a lack of usable and reliable ESG(1) data, which then prevents investment funds from conforming to the specific sustainability preferences of some investors. This means waiting for companies to publish this revised information themselves, rather than working with unreliable estimates.
‘Investors who don’t specify their sustainability preferences follow the KBC investment approach, where we first recommend responsible investments. It’s for this reason that we further expanded our product range over the past year,’ Guns states.
‘Once we’ve checked if the customer has specific sustainability preferences, we can recommend the product that’s right for them,’ adds Guns.
Responsible product range being expanded
‘KBC is systematically expanding its range of responsible investment funds. There’s something for everyone, even though it’s still a customised service,’ Guns explains.
In 2023, KBC added to its range of responsible investment funds by launching the first structured funds that invest responsibly. These unit-linked life insurance (class 23) products have a fixed term and capital protection mechanism, and the final return depends on the performance of a basket of shares. Responsible funds investing in green and social bonds were also added to the range. These funds invest in bonds to finance green and/or social projects.
There was also good news for very cautious investors when KBC made its existing guaranteed-interest life insurance (class 21) products more sustainable. They now also promote environmental and social characteristics.
‘KBC has the above products – and by extension all responsible investments – externally verified as part of the process of obtaining the Towards Sustainability label. This label offers investors certainty that specific criteria are being met. Those criteria have become progressively stricter in recent years and are supervised by an independent party. After all, trust may be good, but proper monitoring is better. KBC signed up for this label as it wholeheartedly endorses these principles,’ Guns explains.
The returns generated by responsible funds need not be inferior to those of conventional investments, especially over the longer term. That’s good news for anyone who cares about sustainability.
Bastijn Guns, Product Manager KBC Asset Management
Sustainability must be tangible
As an investor, it’s no easy task to navigate the maze of legal documents explaining your investment’s level of sustainability.
Early in 2023, KBC started providing an information page for each responsible fund in KBC Mobile and KBC Touch so that investors could more easily familiarise themselves with the fund's objectives, such as reducing the carbon intensity of the companies and governments that the fund invests in.
‘We want to provide insights not only at the product level, but also at the portfolio level. That’s why investors are getting a new sustainability dashboard that offers a better understanding of the level of sustainability across their entire investment portfolio. We also provide information screens and short educational videos explaining certain sustainability concepts. This dashboard will be added to KBC Mobile and KBC Touch in mid-March 2024. It will allow our investment customers to deliberately steer their assets in a more sustainable direction if that’s what they want,’ Guns adds.
Responsible investing hinges on transparency. Clear insights and reporting therefore deserve special attention in the exciting but complex world of responsible investing.
Bastijn Guns, Product Manager KBC Asset Management
‘The world is changing all the time and that’s no different for sustainability and responsible investing. Our ambition is to further expand reporting and our range of responsible investments, making them even more transparent and visually stronger. That’s another way we’re contributing to a more sustainable society,’ Guns concludes.
[1] Environmental, Social & Governance
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This article is informational only and should not be considered investment advice.
