DPAM's approach to social factors in investment policies: Interview with Matthew Welch

Matthew Welch is responsible for the social component of ESG investment policy at Degroof Petercam Asset Management (DPAM). He was one of our guest speakers at our thematic event on Social and Labour Rights in December.

"That in itself says a lot about how we operate," Welch begins. "We have three separate pillars within our Responsible Investment Competence Center, each pillar specialising in one of the three ESG subdomains: an environmental and climate impact team, a governance-focused team, and then the team I’m part of, which focuses on social factors."  

This immediately challenges the common misconception among private investors that sustainable funds are simply ‘green’ funds. "Even the environmental aspect is far more complex than people sometimes assume. Of course, there is a strong focus on keeping global warming within the 1.5°C threshold of the Paris Agreement. But my colleagues also examine issues such as biodiversity, transition finance, and other environmental factors. So even within the environmental dimension, it’s not just about CO₂ emissions," explains the Brussels-based expert.

Measuring Social Impact in ESG

According to Welch, it is a myth that social policies cannot be measured.  "There are clear frameworks in place, such as the OECD guidelines and the UN Guiding Principles on Business and Human Rights," he clarifies. "Beyond that, we also work closely with organisations like the World Benchmarking Alliance, to understand how companies apply these frameworks."  

DPAM’s approach is integrated across multiple levels. "We assess double materiality at the corporate level. That means we look at two things: first, which unsustainable practices could pose reputational and financial risks to the company itself; and second, the negative impact that the company’s activities might have on the environment and society," Welch explains. "But our criteria go beyond just individual companies—we also apply them at the portfolio level and at the broader DPAM level."  

For example, long before several high-profile scandals broke and after years of unsuccessful engagement with the company, DPAM had already made the decision to disinvest from a particular Swiss bank, fearing that potential reputational damage would have significant financial consequences. For similar reasons, several US pharmaceutical companies were also excluded from DPAM’s investments.  

"So it’s not just about ticking boxes or following a predefined policy," says Welch.  "For the social side, a large part of our work involves investigating and assessing controversies. To do this, we collaborate with civil society groups, drawing on insights from NGOs with deep expertise in specific regions or industries. We also rely on investigative journalists. In some cases, we even reverse the process—introducing companies to NGOs that can help them improve their policies."

Engaging with Companies

Welch emphasises that active dialogue with companies is a fundamental aspect of sustainable investing. He also believes it is essential to communicate how this process works, given the complexity of the field and the lack of straightforward solutions.  

"We follow a structured engagement process, starting with formal letters to the CEO or Chair of the Board. From there, we escalate as needed—forming coalitions with other investors, proposing resolutions at annual general meetings, and, in some cases, even issuing public statements about certain companies."  
DPAM does not view divestment as an obvious solution. "The question is simple: would you rather see an oil company co-owned by an engaged investor, or by an investor who actively supports the oil company extracting more oil? The answer is obvious," says Welch. "But if all responsible investors pull out, who will be left to push for change?"

"Having a say in a company is crucial to change the company, nevertheless, we do exclude companies where we see that it will never be aligned with our investment values or the ones of our clients. "

The Cost of Responsible Investing

However, this active engagement approach comes with a significant cost—both in terms of time and resources. "That’s exactly why this is one of DPAM’s core values. We go above and beyond in our sustainability approach because we believe it is both a duty and a financial imperative. Companies that meet our stringent sustainability criteria are, in our view, better positioned for long-term success," says Welch. 

"That’s also why we frequently collaborate with other investors. While we may be competitors in some respects, when it comes to values and impact, we are often allies. Investor coalitions allow us to achieve far more than we could alone."

Regulation and Corporate Awareness

Welch also highlights how regulatory developments are driving greater awareness among businesses.  "This increased scrutiny is pushing companies to take genuine action on sustainability. Many now realise that the era of good PR and polished sustainability reports is over—investors can see straight through that now," Welch concludes.