To Make a Difference You Need to Be Different

    An interview of Sjoerd Rozing, Triodos

    Dutch impact manager Triodos Investment Management (Triodos IM), one of the founding members of the Global Impact Investing Network, is known for its pioneering work in sustainability. The firm’s impact vision is to make money work for lasting positive and sustainable change. More specifically, its aim is to serve as a catalyst in the transition to an economy where planet and people come first and then targeting healthy financial returns.

    As part of their ambition to contribute to society, Triodos IM has recently zoomed in on a theme that is intuitively easy to grasp, yet often overlooked: the welfare of children across the world. Through engagement, Triodos IM also aims to put children’s rights higher on the agenda of the investee companies.

    Sjoerd Rozing, Triodos

    Wanting what is best for our children is a powerful instinct that most people can relate to. “It was a no-brainer for me to explore this theme in the context of investments as part of a new position at Triodos IM,” shares lead portfolio manager Sjoerd Rozing. He recalls that he had just become a father when he was offered the job. “I did say I wanted to think about it for a day or two, but, really, I had already made up my mind,” he says. “Seeing how vulnerable my little daughter is, makes me want to protect her and prepare her for the future. And I do realise that she is rather fortunate, compared to many other kids in the world.”

    Indeed, the world can be a harsh and unwelcoming place for many children. The statistics are gruelling. According to UNICEF, 13.800 kids die every day before reaching their fifth birthday, mostly from preventable causes. 58 million children do not receive any primary education, or just a rudimentary one and 160 million between the age of five and 17 have no time for school as they must work instead.

    Given these multiple challenges, the central proposition of the strategy, to invest for the benefit of children, is clear. How to go about achieving this noble goal, however, is not. “We take a thematic approach to advancing child prosperity, building a portfolio of companies whose business relates to the five areas outlined in UNICEF’s Strategic Plan,” says Rozing. “Each of the companies we invest in needs to contribute meaningfully to one or more of the UN Sustainable Development Goals.”

    Covering the basics

    The five areas that Rozing refers to are related to some of the basic needs all children have, such as nutritious food, water and sanitation, health care and education, and a safe and inclusive environment. Translating these into investment opportunities can be fairly straightforward. “Children need a balanced diet, basic hygiene and care, so, of course, we invest in companies that provide such products and services, focusing on the food and beverages, healthcare, and household products industries,” explains the manager. “Naturally, we also invest in companies that provide online schooling, educational content, and childcare.”

    An investment that clearly aligns with Rozing’s focus is, for instance, OrthoPediatrics. The company specialises in products which are uniquely designed for children, offering orthopaedic solutions for trauma and deformity correction, scoliosis, sports medicine, etc. “Just like us, OrthoPediatrics strives to make a difference in children’s lives by helping them realise their full potential,” says Rozing.

    Getting creative

    Some of the other areas highlighted by UNICEF as key to children’s prosperity can be more challenging to invest in. “How do you find suitable investments for the theme ‘Protecting children from violence and exploitation’, for instance?” ponders Rozing. “Naturally, any company that engages in child labour and other forms of abuse are already excluded from our investment universe. But to proactively invest in the theme, we need to get more creative,” he says.

    Cyber security is one of the few examples of a concrete product or service connected with this theme. “As a parent, I want my daughter to be safe when I leave her watching YouTube videos while I’m taking a shower in the morning,” says Rozing. “This is why we invest in companies providing online protection tools and firewalls.”

    Promoting equal opportunity and inclusion is another area where investment ideas might be difficult, yet not impossible, to come by. “Take telecom providers, for instance,” says the portfolio manager. “In emerging and frontier markets especially, they have become instrumental in providing children access to education. Meanwhile tech services and applications, such as financial services or entrepreneurial platforms, enable parents to run a business and lift their families out of poverty,” he adds.

    Digging deeper

    Given Triodos IM’s focus on finding investments that offer solutions to specific children-related challenges, it is, perhaps, not surprising that these are mostly to be found among so called ‘pure plays’, i.e., small and midcap companies providing a single product or a single service. Such an investment universe, exciting as it is, can be also very challenging to work with compared to better-researched large caps. Rozing is quick to give the credit for finding and screening suitable investments to the team of ten equity analysts working at Triodos IM. “They are incredibly skilled at uncovering interesting and relevant investment ideas and at digging deeper, beyond the easily available data,” says Rozing.

    Building a case, the Triodos way, sounds like an arduous process. “We assess each company to ensure that its business practices do not jeopardise market adoption of sustainable solutions. We apply our industry-leading product, process, and precautionary minimum standards to confirm alignment,” explains the portfolio manager. “Every company is subjected to a thorough analysis and is continuously monitored to see whether it still meets these minimum standards,” he adds.

    The reward of this diligent work is a selection of investment opportunities like no other. “We set out to be different and now we can prove that we are,” says the portfolio manager proudly. “You might not recognise any of the names in our top ten holdings. You need to be truly unique to make a difference.”

    Adding up the results

    “Once we have established intentionality, we know we are on the right path,” says Rozing. Still, it can be difficult to assess the extent of the impact that Triodos’ investments have on children’s well-being. “Measuring our footprint in terms of carbon, water or waste, or quantifying the exposure to each of the UN SDGs is possible,” he explains. “But when it comes to capturing the actual effect that our investments have on children’s lives, it becomes complicated. How many children have we, indirectly, provided healthcare for? How many educational opportunities have we created? Like the rest of the impact community, we are still struggling with these questions. Alas, we haven’t found the holy grail yet,” concludes Rozing.

    “One way we attempt to leverage our impact is by being active investors,” he adds. “We engage with companies to ensure and improve enactment of children’s rights in their business operations. Stewardship is embedded in each step of our investment process.”

    There is, however, one tangible contribution that we can easily measure: the amount of money donated to UNICEF. Each year, Triodos IM donates a portion of the fund’s management fee directly to UNICEF’s programmes, such as the Building Bricks for the Future project in Côte d’Ivoire.

    UNICEF has no role in the development, management or operation of Triodos Future Generations Fund, including the Fund’s investments decisions. UNICEF does not endorse any investment adviser, investment, company or product, and makes no recommendation as to investment in this Fund.

    Image courtesy of Gijs de Kruijf

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