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    From Transylvania to SEB – The Conquest of a Sustainable Transition

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    Stockholm (NordSIP) – Amidst the current boom in Chief Sustainability Officer appointments and ESG-related product launches, it is refreshing to encounter a dose of healthy skepticism. Today, Robert Vicsai, Portfolio Manager Sustainable Investments at SEB Investment Management in Stockholm, is one of those people who can provide incisive perspective when needed. Despite his already busy schedule, we caught up with Vicsai to talk about his personal journey and find out where he gets his unique perspective on investments, sustainability, and diversity. He tells us about his three main pet peeves: Paris-aligned benchmarks, active ownership, and our responsibility in global supply-chain management.

    “It all started in June 1990, when we came to Sweden with my Family,” Vicsai tells us. “We were visiting an uncle who moved there in the 1970’s. Towards the end of our stay, my father announced that we wouldn’t be travelling back home to Transylvania. He had long realised that given our political situation at the time – we were a Hungarian minority in Romania during the turbulent nationalistic post-Ceausescu period – as kids, we wouldn’t stand a chance to develop as individuals. Giving up our home was the price my parents were willing to pay to provide us with a better future.”

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    At the beginning of September 1990, the Vicsai family applied for asylum. “We were taken to Malmö in the south of Sweden and transferred to a boat with many other immigrants who were fleeing the war in the Balkans. I was 14 years old, and I spent the next two years in a refugee camp until we received our permanent residence permit,” Vicsai continues. “There wasn’t any school during those years except for one hour every day when I was taught Swedish.”

    Vicsai managed to learn the new language, mainly thanks to an innate sense of curiosity, borrowing books from the refugee camp’s library. He was 16 when he was finally allowed back to high school, in Alvesta, a small rural town in Småland. “From a socioeconomic perspective, we were poor,” Vicsai reminisces, as his father and his mother had to make ends meet by taking low-paid factory jobs. “However, my upbringing was very rich from an integration perspective. I was quickly admitted in the local football team, I was good at it and I made many Swedish friends. I also made sure to choose a school environment where I was forced to practice my Swedish constantly,” he adds.

    Despite the inclusive environment in the community, young Robert wasn’t encouraged to pursue his ambitions. “Are you sure? Given your background, wouldn’t a more practical-oriented education be more suitable for you?” suggested the guidance counsellor when Vicsai told him of his plan to attend a technical gymnasium (high school). “I was really good at math, but my Swedish and English skills weren’t all that great,” Vicsai confesses. This advice didn’t stop him and after successfully graduating from a technical and natural sciences program, Vicsai attended the university of Växjö in southern Sweden where he obtained a bachelor’s degree. “After that, I chose financial security over academic satisfaction,” he says.

    Indeed, Vicsai’s parents couldn’t support him financially during his studies. “One summer, I got the opportunity to work as an intern for the local SEB branch. That’s how I got my foot into the door of the finance industry. To get a job, it wasn’t about your grades but where you came from. Every time I was given the opportunity, I did my utmost. You commit, you engage, then you reach the next level. No one will give you anything for free,” he says.

    Eventually, just as 9/11 sent the markets into a spin, SEB offered young Robert a permanent position as assistant portfolio manager on the private banking team. “My Swedish skills allowed me to scrape through university, but this is how I truly learned the language,” Vicsai remembers. “Speaking Swedish is not just about the grammar and the vocabulary. It’s about learning the intricacies of the language, the type of words you use in different environments. I also wish that someone had given me the map to understand how to navigate Swedish social codes. This is something that I had to learn over time, and it wasn’t as straight forward as I thought but nonetheless key to my ability to progress through the various diversity glass ceilings.”

    At SEB in Växjö, Vicsai progressed fast and got promoted to portfolio manager. After a couple of years, Vicsai set his eyes towards Stockholm and East Capital. “I specifically wanted to work with Eastern European countries and convinced early Partner Karine Hirn to hire me as a product manager for alternative investments. That’s where I grew up as a professional and started to get into sustainability. I understood that good governance decreases risk.”

    While at East Capital, Vicsai obtained an MBA at the Stockholm School of Economics in 2010. “My daughter was born the day of my final exam. As I took time off to be on parental leave, I started researching options to concentrate on sustainability, but financial markets weren’t focusing on that,” he says. For the next two years, Vicsai’s attention momentarily shifted to fintech, as East Capital was building a proprietary platform to allow clients to buy and sell funds directly. SPP (now Storebrand) then hired him as a business developer for the fund platform group to develop and integrate sustainability throughout their fund offering. “I was impressed by the internal sustainability rating system Storebrand was developing. There were not many fund managers working on ESG back then. I felt that we were at the forefront. We developed a thermometer to rank funds from 1 to 10 and present these results to the client, which was quite unique at the time,” says Vicsai.

    After working closely with the sustainability team, Vicsai took a walk on the wild side and became a fintech entrepreneur for two years. Eventually he left fintech for good and returned to Storebrand to focus solely on sustainability. “My goal was to drive clients to invest more sustainably. I also worked to develop responsible and active ownership,” he adds. Eventually, SEB Investment Management (SEB IM) called. Enthused by the bank’s scale and reach, Vicsai jumped ship, looking forward to the challenge. “Joining an institution with such an impressive heritage and driving sustainability as part of one of the largest financial players in the Nordics is exciting,” he says. Despite the size of the establishment and its clout, Vicsai set off to question everything from the onset. “Coming from the outside, I could see improvements that were hard to spot from inside the organisation. The team was still limited when I joined and I found gaps in the ESG integration from a portfolio management perspective,” he admits.

    For the past two years, thanks to new resources including Vicsai, SEB IM has developed new policies and established a house view as well as a proprietary methodology for ESG integration. “What I picked up from both East Capital and Storebrand was this idea of always pushing the bar higher and thinking ahead. We were pioneering and that’s the spirit we are working with at SEB IM. I’m fortunate to work with many motivated PMs and it’s amazing how far we have come already. I’m proud of how we’ve worked together. For the new SEB Investment Management Sustainability Scores (SIMSS), we’ve literally taken apart all the standard ratings we had from ISS ESG, MSCI and Sustainalytics for instance and combined them with other frameworks including SASB, TCFD and the EU taxonomy. We’ve added data sets from Truvalue Labs (now part of Factset) as well as SDG monitoring from a product, services, and controversy perspective,” Vicsai explains.

    “If you want to have your own view, you need a lot of datasets, just as you do in traditional financial analysis. Our job is to find out if a company does what management say they do. Ticking a box when a company fulfils a reporting duty doesn’t add value. We need to take a stakeholder view and hold companies accountable. We must deal with the staleness of the ratings and forge a current view,” he continues.

    Unfortunately, Vicsai notices very limited information on ESG opportunities, as opposed to the risks that are well covered by now. “Sustainability isn’t merely playing a role in a parallel universe. Managing risks and governance are hygiene factors. The UN SDGs or the Science Based Targets, for instance, are excellent frameworks for communicating or reporting. However, the business model’s output is the only thing that really matters when assessing sustainability. How a business runs and what products and services it sells will drive long-term profitability. Those dimensions are fundamentally interconnected with sustainability. The world faces a set of inevitable sustainability constraints and any business built for the long term needs to be developed around these. For me, turning those limitations into opportunities is what makes a business attractive from an investment perspective,” he says.

    Vicsai holds a small grudge against Paris-aligned benchmarks. “Changing benchmark is a step in the right direction. They may, however, make us feel that we are doing the right thing when we continue doing it the wrong way,” he laments. “These benchmarks are still focusing mostly on Scope 1 and 2 emissions, in many sectors. They are also measuring carbon intensity in relation to revenue, resulting in an over-allocation to sectors where sales are less carbon-intense like healthcare, financials, and tech. What is the real economic impact of the Paris aligned benchmarks? What do we know about the scope 3 in the financial sector? As a portfolio manager, I can easily allocate to less carbon intensive stocks. But we need materials, steel, and concrete to run the world we live in. I’m afraid of leaving these types of investment behind in a carbon intensity optimisation race, when the rising total emissions are what is ultimately working against us,” he says.

    Active ownership is another challenge Vicsai finds frustrating. “I truly believe engagement is the right way to drive change, but it takes time! It’s important to have a plan, processes, and measurements in place, as well as deadlines and enough resources. People are looking at it the wrong way, time wise. Active ownership doesn’t have the right timeframe to reach the 1.5°C target by 2050,” he continues.

    “We are in 2022. If we are to reach 1.5°C in 2050, we must curb carbon emissions today. For example, the biggest carbon emitters overall are energy companies. Through active ownership, we literally need to convince these companies to reinvent themselves fast, often sacrificing their own profitability. So far, apart from these types of investor-led dialogues, energy companies don’t have any incentives to decrease their emissions or avoid increased emissions,” Vicsai explains. For such sectors that require continuous engagement, there is not enough time for active ownership, he believes. The lack of internal resources often also slows down investors’ efforts. To avoid spreading these resources too thin, Vicsai advocates for a different focus. “You need to identify the companies that can transition successfully and concentrate efforts on these. Don’t make excuses,” he recommends.

    Finally, Vicsai is critical of the lack of a holistic assessments by the Western societies of their supply and value chains. “During the last 20 years, we were all about the efficient allocation of capital. Shareholders needed to maximise value and that led us to take every possible step to reduce costs. So, then developing countries like China took over production at a time when we weren’t taking climate into account. In effect, we have offshored a large part of our carbon emissions. We are now dealing with climate problems that we cannot manage, because the levers of control are broken,” Vicsai says.

    Western society has become dependent on low-cost imports while supply chains are now largely controlled by other countries, which environmental and social priorities may be oriented differently. “We need to be much humbler when it comes to our progress and the urgency of the challenges that we face. This is not a problem that we can fix in one quarter,” Vicsai continues.

    For now, any solution to this equation appears painful. “We need to make sure to take social factors into account when doing business or allocating capital. We can’t just leave people behind domestically or accept lesser conditions when working outside of our own jurisdictions. Businesses will also need to take responsibility for scope 3, to capture the emissions of the entire lifecycle, production, supply chain and usage, preferably wilfully rather than by regulatory force. In Europe, the regulator has started to move. Even if many parties look unfavourably at the taxonomy, it is moving the needle. Still, the lack of urgency is problematic. Bonuses are paid for last year’s work and a lack of accountability ensues. There are, indeed, lots of opportunities for improvement but limited time to do it,” Vicsai concludes.

    Image courtesy of Binniam Halid for Swesif
    Aline Reichenberg Gustafsson, CFA
    Aline Reichenberg Gustafsson, CFA
    Aline Reichenberg Gustafsson, CFA is Editor-in-Chief for NordSIP and Managing Director for Big Green Tree Media. She has 18 years of experience in the asset management industry in Stockholm, London and Geneva, including as a long/short equity hedge fund portfolio manager, and buy-side analyst, but also as CFO and COO in several asset management firms. Aline holds an MBA from Harvard Business School and a License in Economic Sciences from the University of Geneva.
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