Stockholm (NordSIP) – One of the highlights of this year’s SkyTop conference, held on 27 October in Stockholm, is a short but poignant speech delivered by sustainability veteran John Howchin: A Look Over My Shoulder: Moving Beyond Financial Returns as the Sole Indicator of Performance. Since deciding to leave his position as Secretary-General of the Swedish AP funds’ Council on Ethics, Howchin has had time to reflect upon the direction in which ESG is heading, and he seems unimpressed by some of the latest developments.
“Behold the pinnacle of ESG,” says Howchin, pointing at the single slide he has chosen to show during his presentation; an equation featuring ESG factors. There are plenty of experts busy performing this kind of calculation nowadays. “But maybe that was not the original purpose of ESG,” he muses.
Not that Howchin has anything against the mathematics of ESG per se. Engineer by training, he specialised in quantum physics at university and started his career at ABB back in the ’90s working on the technical side of the business. After what must have been a momentous trip to China, however, he decided early on that what he really wanted to dedicate his work to was sustainability.
Howchin also recalls what initially awoke his interest in finance. “The only time I remember seeing my colleagues at ABB getting nervous was during a visit by the portfolio managers of Storebrand’s then top-of-the-line environmental fund in 1997.” He couldn’t help noticing that the pressure these investors were putting on the company to become best-in-class on environmental issues was working. “If you can’t beat them, join them,” he decided.
So, what has happened over the more than two decades since Howchin joined the sustainability ranks? Waving a 25-years-old printed copy of Folksam’s pioneering environmental report, he points out that we were measuring the carbon, water, and biodiversity footprint of investee companies back then. Unfortunately, when it comes to the question closest to his heart, i.e., responsible ownership, Howchin fears that progress might have stalled. “Back in 1997, there were plenty of stock-picking funds,” he says. “Those are almost extinct now. The money has come further and further away from the companies.” This is a challenge, argues Howchin, as companies need sound ownership now more than ever.
Howchin certainly knows what it means to engage with numerous companies on specific and controversial topics. As an ambassador of the UN-convened Global Tailings Management Institute (GTMI), he has endeavoured tirelessly to put a stop to inadequate tailings storage facilities. He reminds us about the collapse of Vale’s Corrego do Feijão mine in Brumadinho, Brazil, on 25 January 2019, a human and environmental tragedy.
“Many companies get angry with us, investors, for pressuring them on sustainability issues,” says Howchin. “Our argument has long been that we are helping them get ready for the regulation that is coming. But is it really coming,” he wonders. He fears that things are getting “lost in translation” these days.
Still, Howchin hasn’t lost his faith in the great power to affect change that investors yield. “Companies need really strong ownership now, as we are heading into choppy waters,” he reiterates.
“Let’s get to action,” urges Howchin at the end of his speech.