"There is a growing corporate understanding of sustainability-related financial risks"

Johanna Lundgren Gestlöf, you are head of sustainability at SPP, which runs the Storebrand Group’s pension operations in Sweden. Can you tell us what a day as a sustainability manager can look like?
”It's very varied, which is what's fun. I'm out talking about sustainability, participating in panels and webinars, or presenting our sustainability work in customer meetings or to our own employees at least once a week. This of course also requires that I spend some time ensuring that we have good presentation material and that I have read up on current issues, by following the news, reading reports, or listening to other people's presentations.
 An average day consists of around 50 percent of meetings, some days in the office, and some days via Teams from home. We talk about how to develop SPP / Storebrand's sustainability offering, increase the sustainability of our products and make it easier for our customers to understand what sustainability means. We also talk about how to implement the new EU requirements linked to sustainability, which also means some writing, reading and reporting.”
Johanna Lundgren Gestlöf, head of sustainability at SPP
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You have now had this position for two years. What did you do before you began working in the Storebrand Group?
”After I finished my master's degree in economics at the Stockholm School of Economics, I worked as a management consultant for 3,5 years, i.e. helping companies in various types of strategy processes. I have also worked with politics at both municipal and national levels in various ways for many years.”
How was your great interest in sustainability aroused?
”My interest in sustainability as well as in community involvement is something I bring with me from home. Both my mom and dad have always had a great interest in being involved and influencing society. Dad ran his own business, installing solar panels and heat pumps, and mom has worked with politics most of my life. We recycled everything that could be recycled, had our own compost and only bought organic or locally produced groceries.
 Climate and gender issues were what first made me want to get politically involved, but now that I’ve chosen to work in the business sector, sustainable finance is a perfect combination between politics and the business strategy work I used to do as a consultant.”
Storebrand has worked with sustainability since 1995. How would you describe the role of sustainable asset management today?
”It is becoming increasingly important, and is more often taking centre stage. Just look at everything that’s happening in sustainable finance right now, for example with the EU's legislative package.
 One of the major changes that have taken place is the understanding of the sustainability-related risks that companies must take into account. In the past, sustainability investing was very much about excluding certain unethical industries that large institutional clients did not want to profit from, but it was not closely linked to potential returns. Today, many have come to realize that it can be costly not to be aware of sustainability aspects of an investment. And for those that have not yet realized this, the EU's legal requirements will force them to take it into account.
 The global goals and the Paris Agreement have also become a framework for finding business opportunities within sustainability, and focus has shifted from just opting out of the unsustainable to also choosing investments in companies that do good for the world – both because more capital is needed for these companies, and because they are well-positioned in regard to societal development.”
A lot is happening right now in terms of regulations and requirements for sustainability reporting. From your perspective, what is the major benefit of this development, from a customer perspective?
”That there will be more transparency, and that managers will really need to clarify and define their processes. It will still take a great deal of effort to get a good overview, because of the extremely extensive documentation requirements. But hopefully this will enable authorities, the media and external auditors to identify companies and products that do not live up to their promises.”
Of all the big issues surrounding us, such as biodiversity, social sustainability, and reaching a net-zero climate footprint, which do you see as the tougher challenges, where we have not come as far as we’d hope. And what do you believe is the reason for this?
”Biodiversity is an area that has long gotten much less attention than the climate issue. This is largely because the climate is easier to quantify through carbon footprints. But how do we measure and value nature? However, we now see an increased focus on nature and biodiversity, and Storebrand is represented in the new Task Force for Nature Related Disclosures, which aims to develop a framework for reporting related to nature. 
Like with nature, social issues are more difficult to quantify and follow up. But with the corona pandemic and the war in Ukraine, there has also been more focus on this as well. Here, transparency in the supply chain is a major problem. Here, too, much is happening to improve it, especially in the EU, where new legal requirements will be made for due diligence for human rights at the supplier level. However, this only applies to large companies, which means much information will continue to be lacking.
 We can also see that the link between climate change and social issues needs more attention. We need to ensure that the production of renewable energy sources does not take place at the expense of human suffering in mines or occupied territories worldwide. The green transition needs to go hand in hand with human inclusion, since, for example, jobs in the coal industry will disappear.”
As financiers, we have a great deal of influence. How do you think we could make the most use of this? What is the most important task?
”I would say that our combined efforts are what matters most, precisely because it has an impact on society and points out the direction in which capital will move in the future. By excluding companies, you partly reduce the risk in the investments, but it also sends a signal about what you as a company should not be doing if looking to attract capital. Selecting more "sustainable" companies, provides more capital to industries and companies that need to grow, but it also shows which new types of companies it might be wise to create. And by influencing the companies we own, we can in a very concrete way help push the sustainability work of these companies forward.
Also, the work we do to raise sustainability towards the customer is a type of advocacy work, which further strengthens the trends I have just mentioned. If the transition is to happen fast enough, capital, politics, customer demand and companies need to work in the same direction.”
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In addition to the financial market and the commitment of the individual, what political work or political decision would be a catalyst for a faster change towards a sustainable world?
”The most important part is to price carbon dioxide emissions in a better way, and really make it more expensive to emit greenhouse gases. I see it as unlikely that we will get a global carbon tax, but the EU's work to include more sectors in the Emission Trading System and introduce a border adjustment mechanism are important steps along the way.
 In Sweden, I think much comes down to shortening permit processes and implementing concrete incentives, such as green taxation, to speed up the transition.
 For social sustainability, the steps now being taken with increased demands on due diligence processes for the large companies' supply chain are good.”
There is currently a lot of turbulence in the world around us; the war in Ukraine, high inflation, interest rate hikes, and the pandemic that has been affecting the world for the past two years. Do you believe the sustainability engagement has generally increased or decreased during these troubled times?
”During the corona pandemic, we saw that interest in sustainable investing increased. The shaky stock markets we have seen during this year have led to a reduced inflow into sustainable savings products, but there has been an even greater drop in unsustainable products, so it does not seem to be due to a reduced interest in sustainability. I believe that the commitment to social sustainability and human rights, and human humanity, has been strengthened. At the same time, there has been less room to talk about climate, and the Greta Thunberg effect is not as evident as before. But in general, the younger generation is socially conscious, and that has not changed during all that has happened.”
 What are the most common questions about sustainability you get from companies that are going to invest sustainably?
”More and more people want to be able to measure the sustainability of their investments, and be able to show how their ratings have improved. Because sustainability is so complex, it is a difficult task to solve, but we are putting more and more effort into trying to visualize different aspects of sustainability in saving, such as the climate footprint or the proportion of fossil-free investments in a portfolio.”
Most people have realized that change is needed to make the world a more sustainable place. But what resistance can you encounter, if there still is? And if so, what is the most common mistrust of sustainable asset management?
”It is becoming rarer and rarer among customers to believe that you have to give up on returns in order to invest sustainably, even though there are still those who believe so. On the other hand, there are, with some justification, some who question what is labeled as truly really sustainable and not. Is a new electric car really better than an old petrol car? Not so long ago, everyone was encouraged to use ethanol to fuel their cars, when today it is not classified as sustainable. And how do you know that the production of components for solar cells or batteries does not violate human rights or harm the surrounding environment?
 This uncertainty is definitely an obstacle to more sustainable investment, but hopefully the taxonomy and more comparable information through the Disclosure Regulation will contribute to clarifications. But one must have respect for the fact that sustainability is a complex issue, and that different parts are connected in ways that sometimes lead in opposite directions. As a customer, you must therefore decide what aspect is more important for you. As asset managers, it is important that we understand how different aspects are connected and that we continue to develop our expertise in different areas so that we can push for development in the right direction.”
I usually conclude by asking about the future, what trends you see coming. This time I will instead ask: What do you think will be the most difficult – but the most important – thing that must change for a sustainable transition to happen?
”It needs to become significantly more costly to be unsustainable, and more rewarding to be sustainable, for companies as well as for individuals. At the same time, this needs to be handled in a way so that people's confidence in politics is not reduced, and so that people do not oppose the transition because it makes living more expensive. This is, of course, a huge challenge. But the positive thing is that we now see that all parts of society are increasingly moving in the same direction. That's why I'm still optimistic.”
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Written by Natalie Westermark, Storebrand Asset Management Sverige
Translated to English by Markus Lutteman, We Don’t Have Time
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Marine Stephan
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great interview and good insights!
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103 w
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"There is a growing corporate understanding of sustainability-related financial risks"

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