Stockholm (NordSIP) – Despite Scandinavia’s perceived homogeneity, sustainable investment experiences can vary widely, due to the idiosyncrasies of each country’s industry and history, even across countries as similar as Sweden and Norway. To understand these differences, NordSIP reached out to Hilde Nordbø, who as the incoming Head of Sustainability at Handelsbanken Norge has a privileged view of the sustainable finance landscape in the region.
The Power to Affect Value Creation
Nordbø’s introduction to sustainability occurred during a Corporate Social Responsibility masters course over a decade ago. “Through that course, I realised I wanted to work with sustainable capitalism.” However, Nordbø was ahead of her time. “Twelve years ago, the field was nowhere near where it is now.”
After some time working in academic research focusing on sustainability management’s organisational implications, stakeholder dialogue, and climate change, Nordbø joined E&Y, where she focused on sustainability reporting, verification, and climate auditing. “It was at E&Y that I realised the power of finance to affect value creation by directing the flow of capital. ”
“When I started working at DNB in 2016, sustainable finance was starting to take-off. I had the opportunity to work developing a sustainability strategy for DNB and for developing ESG reporting and integrating it into the regular financial reporting of the bank,” Nordbø recalls. “I was also involved with stakeholder dialogue, specifically in the context of the Dakota Access pipeline project. The project raised important questions about indigenous people’s rights, clean water and whether a Norwegian bank should finance a fossil fuel project in North America and I had the opportunity to meet many of the stakeholders.”
A Decentralised and Customer-Focused Model
After four years at DNB, Nordbø was ready for a new experience, working with sustainable finance in a more focused way. “It’s very important to integrate sustainability concerns into financial decisions, but I wanted to focus on identifying what that means for a small company seeking funding. That business line requires a close relationship with the client, understanding their business, their industry and their product. It strikes me as a more rewarding experience.”
“I decided to move to Handelsbanken because I was intrigued by their decentralised model and the narrower customer focus and relationship banking that the company is built upon. It’s more complex and difficult to target and use sustainability as a comparative advantage while aiming to target a more diversified market,” Nordbø says. “It was also a positive surprise that CEO Carina Åkerström decided to include sustainability as a group function recently. For sustainability to be truly integrated, you need to make room at the table where the long term strategic decisions are made.”
“Handelsbanken Norway is the fourth largest bank in Norway when it comes to lending and corporate clients primarily within real estate. Handelsbanken’s business requires a more segmented approach to the customer base to offer the right products and services. I think this is a great starting point to make an impact and drive the change that we need to see in that type of business,” Nordbø adds.
There were also characteristics specific to Handelsbanken as a Swedish company that appealed to Nordbø. “Sustainability is a core competence and at the root of the culture in Handelsbanken. It has a very low-risk tolerance, it is less exposure to cyclical industries and plays a central role in the communities that it is located,” she says. “My impression is also that Swedish organisations are ahead of their Norwegian counterparts regarding green and sustainable financing, which provides a very interesting learning opportunity.”
Behind but Not a Laggard
According to Nordbø sustainable finance in Norway is not as advanced as in Sweden, but it is growing fast, and its peculiarities can also be seen as its comparative advantage. “In recent years, most institutions have taken significant steps to integrate ESG, establishing KPIs, developing clear strategies, and offering more sustainable products to their customers, supported by dedicated teams.”
According to Nordbø, the Norwegian state’s ownership in listed companies has contributed to defining what responsible ownership can look like. “The Norwegian State, as an owner, has clear expectations towards the companies they have stakes in. This has been an important driver in the private sector, especially when it comes to the development of good ESG reporting and corporate governance. The regular meetings that we had in DNB with the banks largest owner (Ministry of Trade, Industry and Fisheries), helped understand how the bank could further improve sustainability integration.
“As many companies find themselves in a transition, investors can choose to either divest or engage through active ownership. The discussion in Norway tends to be in favour of active ownership and engagement rather than exclusions,” Nordbø says. This is not an accident. Norway stands out among the Nordic countries because of the role of the oil and gas industry. “As a country, we are faced with the paradox of wanting to be a sustainable frontrunner, while having based our welfare system on the revenues of the industry that is at the heart of the climate crisis.” However, this unique perspective can also be an advantage. “The issues and conversations that Norwegian society has to confront about the transition are similar to those faced by companies,” Nordbø says.
Nordbø’s is most looking forward to guiding Handelsbanken Norway’s clients through their sustainability journey. “Companies struggle with sustainability. The majority of companies do not have dedicated ESG resources to determine what it is that they need to do to adapt to coming expectations, whether coming from customers, capital market or regulators. I believe that Handelsbanken has a huge opportunity to fill that gap and assist clients with their specific ESG needs.”
“Another one of our main focuses ahead will be to accompany European regulatory developments, and explain to our customers how it matters to them,” Nordbø adds. “Clients have to weigh a wide range of considerations. Our function is to help them identify and prioritise the most material issues. For example, within real estate, the definition of a green building varies even across the Nordics. The publication of the EU Taxonomy in the spring will provide a lot of clarity and possibly allow us to streamline this and other definitions across the region.”
Going forward, Nordbø identifies four main themes that will dominate sustainable finance. “I think climate risk and its implications, including threats to biodiversity, will remain the most important sustainable consideration. COVID-19 and its social consequences will also probably feature prominently on the sustainability agenda. Other issues that Nordbø will be keeping an eye out for include privacy issues and Tax avoidance. “If I can add a runner up, the consequences of moving from a linear to a circular economy and how that will affect asset valuations will also be a dominant consideration going forward,” she concludes.
Image by Stig B. Fiksdal