Takeaways from LF Liv’s ESG-Day

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    Stockholm (NordSIP) – There is hardly a shortage of challenges these days, from the brutal war in Ukraine to raging inflation and an unfolding energy crisis. Amidst it all, Länsförsäkringar Liv’s ESG-day, held at the end of October in Stockholm, is a reminder that we cannot use any of these as an excuse to delay the necessary sustainable transformation.

    One of the event’s highlights is a panel discussion moderated deftly by Kristofer Dreiman, LF’s Head of Responsible Investments, on the topic of how businesses and investors can contribute to the transition in the current turbulent times. To help him answer this pertinent question, he has gathered representatives from three different industries, Eva Axelsson, Chief Sustainability Officer and Head of Group Sustainability SAAB; Atusa Rezai, Head of Social Sustainability at Brunswick Real Estate; and Hans Djurberg, Head of Sustainability at SCA. The academic view is included through the participation of Sophie Nachemson-Ekwall from the Centre for Sustainability Research at the Stockholm School of Economics. She is also an advisor for Sustainability & Climate Change at PwC.

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    A changing risk backdrop

    To frame the discussion, Dreiman reminds the panellists and the audience of the main challenges outlined in the Global Risks Report 2022, published by the World Economic Forum. The question is whether the risk priorities, as seen at the beginning of this year, have already shifted, given the developments since.

    According to Axelsson, all these risks are still present and haven’t diminished. We have all had to add a few more to the list, however, and urgently so. She mentions, of course, the war and the energy crisis among those.

    Resai has more risks to pile onto an already intimidating list: hundreds of millions of refugees, a revolution in Iran, and a wave of armed violence in Sweden, for instance. Rather than trying to tackle all of these simultaneously, she says that at Brunswick, the idea is to let the local conditions dictate the company’s priorities and solutions.

    The green imperatives on WEF’s list are already embedded in SCA’s everyday work, according to Djurberg. Yet, listening to some podcasts from the beginning of this year recently, he realised just how much and how quickly priorities have shifted since 24 February. Although his company has fared relatively well compared to the competition and is less affected by the rising energy prices and raw material costs, SCA feels the pain too.

    New opportunities

    Steering the conversation away from risks, Dreiman asks the panellists to name a few opportunities that a sustainable transformation offers.

    Axelsson points out a potential NATO membership as such, reminding the audience that combating climate change is one of the goals of the alliance. She is also grateful for some of the lessons in crisis management attained during the pandemic.

    The urgency of replacing fossil fuels and fossil-based materials has become increasingly evident after 24 February, according to Djurberg, who seems content with the tangible solutions that his company offers in this respect.

    For sustainability researchers, meanwhile, the rising geopolitical tensions have brought a renewed focus on the ‘S’ in ESG. It is easier to get grants for studying social aspects now than a couple of years ago, according to Nachemson-Ekwall. She points out the social cohesion erosion problem as an example of a key risk that has gotten more attention recently.

    How to invest in change

    An important question that Dreiman raises next is how an insurance company such as LF Liv should allocate money to the long-term sustainable transition while at the same time preserving and growing the capital in the short term. There are, alas, no easy answers. Resai asserts that Brunswick’s hypothesis is that social investing should generate returns. However, the time horizon is different as it takes time for social sustainability work to exhibit results.

    Finding the proper local context is key, according to Nachemson-Ekwall, who maintains that this is a good way to cover both the ‘E’ and the ‘S’ aspects of sustainability.

    For SCA, the company’s business goals are the same as its sustainability goals, explains Djurberg. That said, he is critical about how his company is expected to take care of natural resources like forests, water, and air “for free”. He believes that SCA is not adequately compensated for all the costs incurred by its inherent sustainability approach.

    Axelsson, too, is critical of investors’ lack of appreciation for SAAB’s sustainability efforts. She is referring to the fact that the defence industry is currently excluded from the taxonomy framework.

    The rules of the game

    No ESG discussion is complete without the mention of rules and regulations. All the panellists seem to agree that the EU’s Green Deal has brought more clarity and transparency yet also added to companies’ and investors’ burdens. For global companies like SAAB and SCA, comparability across borders is challenging. International standards and frameworks are developing, but not nearly as fast as the companies would wish.

    Generally, the panellists view the new regulations favourably just as long as they do not force practitioners to just sit in the office and write reports, as Resai puts it.

    Nachemson-Ekwall reminds us that regulations are always much tougher on smaller companies that don’t have the necessary resources. She appeals to her co-panellists that, as big companies, they should take more responsibility and lead the way.

    Judging by this lively discussion, at least, it appears that businesses and investors can indeed contribute to the sustainable transition in these turbulent times of ours.

    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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