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SUSTAINABLE DEVELOPMENT & GROWTH FUND by Geert van der Linden

23 March 2021

Why should any company in the Philippines care about their impact on the environment, or about the way they treat their employees, or their standards of corporate governance? Why should companies care about the UN Sustainable Development Goals for 2030 that not only include environmental, social and governance goals but many other goals as well?

They should, because in the last decade something has changed in the way people and society looks at these things. We are all aware of the enormous damage done to our natural environment and the catastrophic impact of climate change. We do not think it is right that people are forever employed on short-term contract or that women cannot be in senior management. We feel that companies should not only care about their shareholders.

How can companies be persuaded to take these matters more serious? Finance is one thing companies care about deeply, and around the world finance is being used to nudge companies to become more responsible members of society and to not only focus on maximizing profits for their shareholders. A year ago, this convinced some people in Manila to start discussing the setting up of an equity investment fund that would only invest in Philippine companies that take these matters seriously. The basic idea (and hope) was that this would set an example for others to follow and that Philippine corporations would realize that it would be easier to raise money on the capital market if they would subscribe to these goals, not only on paper but also in their day-to-day operations.

ATR Asset Management Inc. (ATRAM) was an enthusiastic supporter of these plans and over the past 12 months an approach or metric was developed that ranks all corporations listed on the Philippine Stock Exchange based on their support for 12 of the 17 UN Sustainable Development Goals (we left out those goals that are more the responsibility of governments). We looked at three aspects: core business operations of companies (e.g. what do they do with their waste products, do they use renewable energy, etc.), their internal management (e.g. do they employ many people on short-term contracts, are there women in senior management, etc.) and their corporate social responsibility activities. Among these three we gave by far the greater weight to business operations. In the end we selected the 20 best corporations for inclusion in the new fund that was given the name Sustainable Development and Growth Fund and is managed by ATRAM.

Why would investors put their money in this fund? Based on our own analysis and also on overwhelming evidence from around the world it turns out that these kind of ESG funds or sustainable funds do not only support important goals but that they also give a good return to those investing in them.

The Banko Sentral approved the Fund in January 2021 and it was launched last month. See https://www.atram.com.ph/funds/uitf/ATRSDGA 

by:  Geert van der Linden