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Karin van Baardwijk (KvB): I've been able to do many roadshows with our clients in different parts of the world, and I cannot remember that there was a single conversation that was not about sustainability.

Erika van der Merwe (EM): Karin van Baardwijk has been Robeco’s CEO for just over a year now, a period that coincided with what was a perfect storm for asset managers. A war, a drastic shift in the direction of central bank policy and negative returns across most asset classes kept investors focused and humble.

What do these events mean for the asset management industry and how best to position for the future? Karin, welcome to the Robeco podcast. Good to have you on the show and to hear you sharing your perspectives.

KvB: Thank you, Erika.

EM: So Karin, looking back over the past year, what are your observations on these events, what you saw happening from your vantage point in the industry?

KvB: Yes, I think as of January last year, being a CEO during this turbulence wasn't easy, let's say it that way. But I think the lucky part for me was that I've been working with this company for 17 years, and when the going gets tough, you basically see that there are so many people around you that you know, have the right answer. So it's mostly been a job to bring people together. We had to do with many uncertainties already in the beginning of the year, like the war in the Ukraine, but also many things from a geopolitical stance, high inflation, high interest rates, completely different, I would say styles in terms of investment, investment styles that needed attention. But if I look back, I think we've navigated very well. I think the position of Robeco has always been strong and also demonstrated that the strategy that we've defined for 2021 to 25 is able to weather the many storms that the market is throwing at us. So I think I'm still positive on everything that 2022 brought us.

EM: And in that time and even today, what were the conversations that you were having with clients? And I'm guessing those conversations were shifting in tone as the year progressed.

KvB: Yeah. So actually for me, in my case, it started as getting to know each other even better and having an introduction to clients, but pretty fast in the year it already shifted to, so tell me what is Robeco’s outlook on the remainder of the year, how do you look into the future? And of course no one has the crystal ball to actually know what's going on in the upcoming year. But I think looking back, it was safe to say that for our clients there was no safe place to hide, whether it was equities or fixed income. So it was really, really tough for them. And I think the best thing that we could have done, and I think we already did that very well, is to have the conversations with our clients on, you know, what keeps you awake at night, where are the opportunities, what do you want to, what's your ambition for this year? And then actually navigate them through all the turbulence and keep your calm. I think one of the things that our clients mentioned to us is that they really appreciate the time and effort that we spend with them on educating them on the topic of sustainable investing, but also, I would say, they like Robeco for the quality that we stand for, whether it is the research DNA, whether it is the quality of our people. So being able to talk to them calms, I think, a bit of the emotion around the market volatility. And this is also where I think you build the credibility and the trust that you need going forward. We stick to our guns when it comes to our investment believes and styles. We don't change that when the market becomes tough. And also here there was a lot of applause from our clients of doing that, but continue to educate them on what that actually means.

EM: So I want to pick up on that last point, because I think your job to clients is a very careful balancing act because on the one hand, beyond what markets are doing, just structurally trend-wise, you need to listen to what clients are saying, what they want from you, the kinds of products they want. But on the other hand, you need to stick with those convictions that you mentioned, your research and your processes. So more sort of bigger picture, what trends are you seeing and what clients are wanting? How is that changing? And before you answer, here’s some color for you. These are two of your global peers, asset managers, telling us what clients are wanting from them.

Voice fragment: I would say clients increasingly ask for outcome-oriented investing, and an outcome can mean a bunch of different things. But they no longer come and say you need to beat the benchmark in this particular strategy by 200 basis points or 300 basis points. So they might look for income, they may look for inflation protection, they may look for tax efficiency, they may want to see some of their personal values expressed in their portfolios. And so it actually offers some very interesting opportunities for us, I think, also enhanced by the advancements that we've seen in technology that we can actually better deliver customization to our clients.

Voice fragment: Clients actually want to do more business with fewer players, and that started in the institutional business, but is now very clear in the retail world as well. And so you're going to see continually the large firms, I think, continue to gain share driven by that, by that trend. Are you seeing cost pressures, though, in your business from some of those changes? Without a doubt. I mean, every time somebody asks for a strategic partnership, I watch my wallet, right? I mean, but that's good. That's competition. I welcome that.

EM: Karin, you might have recognized the names. Hanneke Smits, who is a CEO BNY Investment Management. David Hunt from PGIM. Covered a lot of ground there. Can you react to anything there, because we heard customization, consolidation and strategic partnerships.

KvB: I think everything I've heard was very recognizable. On the first part, customization is very important. We get those questions all the time. So we like what Robeco is doing but we like it slightly tilted to the left or the right. And what can we do for our clients there is something that's key on our agenda, also from a cost-control perspective, right? Because if you customize and over-customize, how do you keep your cost/income ratio in balance and how do you grow into scale when you have all kinds of different customized solutions at the same time? Technology definitely is one of the key distinguishing factors because that can allow for that customization while at the same time making sure that your costs do not grow tremendously. I like to comment on strategic partnership, because it seems sometimes that the word of acquisitions and M&A is a bit pushed back towards the background. And now the new word is strategic partnership, and I think that can only work when there is sufficient to gain for both parties involved. So what does the strategic partnership look like? Especially in our position as a leader in SI, we've been asked so many times for strategic partnerships, which I can fully understand because we have a lot to share and to gain. But for Robeco’s perspective, how do we monetize out of such a strategic partnership? It's a question I always ask and I always think about, so is it worth to continue this or not? And sometimes when there's a good balance between what you bring and what you get out of that strategic partnership, then it's of course, something that's really beneficial to both. And I think clients, I recognize also the comments on the type of products, on the income orientation, on many things that they're interested in. And mostly because what Robeco has to offer is the combination of products that both lead to outperformance, that lead to generating alpha, while at the same time also they help to allocate the money to places in the world where you can put your money to work for the real economy as well. So it's welfare and well-being at the same time. And this is a question that clients often ask me, in terms of: How do you do that? How do you structure that? Can you help me on implementing ESG into my own organization or into the portfolio? So those types of questions, I think they pop up literally in every conversation.

EM: It sounds as though the questions around strategic partnerships and customization are very much centered around sustainability. Your sustainability capabilities.

KvB: Yes, a lot of that. So last year I've been able to do many roadshows with our clients in different parts of the world, and I cannot remember that there was a single conversation that was not about sustainability, and it's interesting to see how that evolves. So what's the angle that a client takes, also determined by the rules and regulations that are applicable for them, but also their maturity curve in terms of awareness. So how much do they understand about the opportunities that sustainable investing has to offer? Is it mostly around voting and engagement and exclusion or more deep down into the ESG integration or SDG framework? What type of products are they interested in? So it's mostly a question on can you help to educate us and can you help to implement it into the organization? And that can have all forms and shapes, but it depends on which part of the world you look at. And for us, it's extremely important to take a global lens when you discuss sustainability investing.

EM: On the topic of sustainable investing. So you've been a lead in this area for much of the past 25 years, and we see it's become a matter of exponential change and urgency. So given that urgency, do you have any frustrations regarding bottlenecks, those areas where you would have hoped to have seen more progress by now or where it really takes a lot of work to move.

KvB: I think it's not so much frustration or bottlenecks, I would say, but you do engage in this theme because you strongly believe that in the end, for our generations to come, it's very important to have a world where there's a balance between the welfare and the topic of wellbeing. And here you could definitely see that although there's so much conversation and there is so much attention to this, the pace in which the world is moving to a better outcome is still relatively slow. You need to partner, of course, with our clients, but also with regulators and NGOs. The WWF is a nice example of a partnership that Robeco has engaged with, but there is more. There's also Climate Action 100+. And what's interesting is that these parties not only reflect, but they also drive the legislation. I think what is very important here is that the WWF, for instance, has so much knowledge when it comes to biodiversity. They have a lot of scientists that collect data that are very knowledgeable. But our unique expertise is to bring that knowledge and that data into a product solution. So here we developed, for instance, the biodiversity framework. That also nicely fits into our biodiversity fund that we've launched last year. I think that's a nice example of where you do see that you bring these different worlds together, these different stakeholders, and in this case WWF and Robeco. And I think more and more will come out of those types of partnerships and that will, I think, evolve into more partnerships and others taking that same example. And the more and more we all move into that same direction, the faster the outcome and the better the result.

EM: I'm sure the clients you're talking to are convinced about the importance of sustainable investing. But if you look around you, if you read the financial news, it's clear that there still is some skepticism on sustainable or ESG investing for various reasons. It's a discussion that's become quite vocal in the US, for example. We saw that trend over the past year with BlackRock's Larry Fink having to defend himself against accusations of ‘wokeness’. Is this skepticism something that you encounter in any of your discussions with clients and what generally do you see the aspirations being?

KvB: I think it's fair to say: yes of course I recognize it. But that's also what I meant with the global lens that you take. I think in Europe we've seen that the maturity of what we do and the awareness on sustainable investing is extremely high. But sustainable investing in Asia or sustainable investing in the US is something else. It's different, depending on of course, also the regulation part that I just discussed. For the US with the political regime around it, with governor DeSantis also clearly taking stand. And you also see some of our colleagues in US asset managers struggling with their ambitions to focus on ESG investing and SI, in combination with, I think the more outside view on sustainable investing, it's something that we clearly recognize. But I think in this case for Robeco, it still provides the opportunity to demonstrate that performance play is immediately connected to also achieving your sustainability goals. And that is something that we continuously talk about and we educate people around that. So I recognize the criticism, but it doesn't mean that from our perspective you don't talk about our clients or with our clients in the US. I think it's about giving them enough knowledge and enough insights to make or create an educated opinion on who they want to be and which goal they would like to achieve. And I think that's a very important role that Robeco can play. What I also see very often is mostly around definitions, and I don’t know if you recognize that as well, but people mess up the impact and sustainable investing or versus the ESG integration for instance, where for me impact and sustainable investing is mostly around, in what ways does the company impact sustainable development? And then it's more around the focus on creating social and environmental value, where on the ESG integration side, it's more a question of what effect does sustainable development have on a company? And here you see that it's the focus on financial impact and performance. So here….

EM: A huge contributor.

KvB: Absolutely. And what I see is that we have a lot to offer to create that clarity when it comes to investment research. I think we have a breadth and depth of knowledge to educate our clients, but also we have a lot of practical experience to demonstrate to them how we can actually implement it. So we have a lot to offer. And what I often tell them and I know that some of my colleagues use that as well, is if the question comes up with how many performance do I have to sacrifice to reach my sustainability goals, you can also question whether that is the right question to ask, right? I think it should be what type of sustainable investment approach is most likely to deliver the returns that individual investors need? And our colleague Rachel Whittaker has mentioned that as well several times. I think that's a very valuable remark and then take the conversation from there.

EM: Indeed. Moving on to regulation, it's everywhere in the financial services industry and as an investor touches everything that you do, how do you keep up in terms of just keeping up with what's changing, but also having the right people in place, the right systems, the right reporting measures?

KvB: I'm always a bit torn about regulations, I have to say, because sometimes it's about the burden of the regulation, the amount of investments that you have to make, the pace in which you need to run to catch up to the implementation timelines or the milestones that need to be achieved. Just look at SFDR regulation and how much people are involved in that. So that's clearly one. On the other hand, sometimes regulation is also a blessing in disguise. We have a fiduciary duty to fulfill and we take that very seriously. And the same type of regulation also helps us to distinguish ourselves from others because regulation is actively demonstrating if you have the evidence to back up your stance and if you really have implemented the regulations accordingly. I think competitors who cannot demonstrate that are becoming more visible to the outside world because of regulation. So in that perspective I mentioned it’s also a blessing because it allows us to demonstrate what we have as Robeco that’s in line with rules and regulation. And I think for the outside world it's easier to make a judgement call on who to engage with and who not.

EM: And there's always the innovation question linked to that. Does it hinder innovation? But from what I see at Robeco, in a way it also stimulates innovation because you have to be innovative in how, you know, what product would best suit that or would do well in that environment.

KvB: I think the first connection between regulation and innovation always is that the more regulation there is, the less innovation potential there is left. But I think what it allows for, is for us to be more creative in a way, and given the fact that there is so much regulation in our industry, you need to keep up with the potential that there’s still out there. And I think there's a lot, right? So I think that if you look at the problems in the world like climate or energy shortage that keeps on demanding for new solutions. So I just mentioned the example on the biodiversity side, which is I think a very clear example as well, where we bring together the knowledge of various parties and come up with product solutions and new insights that I would definitely call innovation. But there's more. I think on the quant side as well, we've always been focusing on more of the traditional Fama-French data sets and on factor investing. And here we've been focusing more on alternative data and find other alternative signals that can lead to new insights where other traditional data sets can cannot. And how do we use that into new products, like the quantum product that we've launched last year in November, but also how do we translate that into other investment capabilities within quant but also outside? So I think there is a lot of innovation still to grasp. Another example that I absolutely like is something that we've launched last year on Open Access. Here, we basically said quality of data is something that's extremely important to us. It can either hinder you or it can provide you a competitive edge. And with Open Access, we basically said: without any commercial intention, let's share some of our SDG data with the outside world, with our clients, but also with some of the academics and then see what the feedback is once they use the data and that feedback we can use to enhance the data, but also our thinking around it. Of course, ultimately in the longer run this is nice to potentially drive any standard setting around it, but I think what on the shorter term it brings is if people use our data, what issues do they run into, can we learn from that. I think it's a very nice angle of innovation as well connected to who we are, research, data, as well as AI.

EM: And partnership.

KvB: And partnership.

EM: Moving to the people side of the business. Karin, you've done a fair amount of hiring over, I think over the past 2 to 3 years. My impression looking back, certainly over the Covid time, is you showed a lot of bravery, I think, and foresight even in that time to still be hiring. What was your thinking at that time? And even now in continuing to expand?

KvB: I think we have to, right? So I think it's the people that drive our business. Yes, it's been a more difficult year, but at the same time, it was still, I think the results of Robeco have always been good enough to allow yourself to continue to invest. And we continue to invest in our people. And I think if anything, Covid has learned us is that with opening up of the boundaries and the way that we work, Robeco was able to tap into global talent across the globe, which is also one of our strategic pillars to be an employer of choice for many people. And I think if you combine that with the strength that we have as a leader in sustainable investing, that combination of new talent trying to find a company that suits with their personal values and morals, but also has a clear view on the purpose, has enabled us to bring a lot of talent into our organization. And I'm very happy that we've been able to do that.

EM: Related to that, you've done a great deal of work in the area of diversity, equity and inclusion. Many angles to that. But let's hone in on women and the war for female talent. Your views on that?

KvB: That's I think, a battle that will continue for a long time. And as a female leader within the organization, I've always tried to also help other females to have a similar journey or to talk to them about, you know, the things that hinder them in being successful, but also acknowledge the fact that it's not just about female leadership, it's also about diversity of minds and making sure that the population of Robeco is also a reflection in all the countries that we work and to make sure that for the global workforce that we have, Robeco is a true home where you can be yourself and can be your authentic self, where you bring new skills and experiences to the table. So we've done a lot of work in terms of the DE&I committee, the DE&I roadmap, and we just started that, to really understand that this will be a very long journey ahead. You don't change your work force overnight, but I'm very happy to see how effective we have already been. I think that, to go back to your question on female leadership, it's not so easy to find other females and then horizontally bring them into your organization. I think it's extremely important for us to home-grow more and more female leaders, bring them in from university, guide them through motherhood, guide them through their first steps in their career, and ultimately creating the potential to be part of an executive committee. And basically, that's also the journey that I've have experienced at Robeco. So, yes, it can be done, but it will take some time.

EM: And looking to the future, let's say the next 3 to 4 years, what will be the biggest challenges for the asset management industry and from the Robeco perspective, how you position for that?

KvB: We don't have a crystal ball, right. We don't know exactly what the markets are going to do, what the world is throwing at us again. But I think in general, what's most important is that we stick to our guns, that we know what we're good at. We play to our strengths on our five key investment capabilities on the fixed income side, on the quant side, emerging equities, trends and themes. We have a lot to offer and it’s important for us as active managers that we basically show to the outside world what we can provide in very turbulent and volatile markets. And here I think we are absolutely able to demonstrate that although the challenges will still be there and although we do not exactly know what 2023 will bring and the years beyond, clearly there will be light at the end of the tunnel. But we have to stick to our guns and continue what we have laid down in our strategy 2021-2025.

EM: Karin, thank you so much. It's so good to listen to you.

KvB: Thank you.

EM: And to listeners, thanks for being part of this conversation. If you've enjoyed the show, please rate the Robeco podcast on the platform from which you're listening. We'd love to hear from you, so please send us your comments, feedback and suggestions to podcast@robeco.com. You'll find all our podcasts on your favorite podcast platform as well as on the Robeco website.

Voice: Thanks for joining this Robeco podcast. Please tune in next time as well. Important information. This publication is intended for professional investors. The podcast was brought to you by Robeco and in the US by Robeco Institutional Asset Management US Inc, a Delaware corporation as well as an investment advisor registered with the U.S. Securities and Exchange Commission. Robeco Institutional Asset Management US is a wholly owned subsidiary of ORIX Corporation Europe N.V., a Dutch investment management firm located in Rotterdam, the Netherlands. Robeco Institutional Asset Management B.V. has a license as manager of UCITS and AIFS for the Netherlands Authority for the Financial Markets in Amsterdam.