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    Schroders’ New Sustainable Head Aims for More Visibility

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    Stockholm (NordSIP) – “I love it when a plan comes together,” says Willem Schramade, Schroders’ new Head of Sustainability, Client Advisory, as NordSIP catches up with him just a couple of months after he joined the firm. This quote from the popular 80’s TV show, The A-Team, perfectly summarises how his new role feels. “There are just so many things from my previous roles coming together,” he explains, referring to his background in academia, asset management and as a consultant.

    The best of three worlds

    Teaching sustainable finance and writing a textbook on the subject has certainly been very helpful, asserts Schramade. “It forced me to think through many issues much more rigorously than I otherwise would have done, starting from the premise that we need a financial system within planetary boundaries and what that means for goal setting, valuation, views on risk, etc.”

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    In his previous asset management roles, he has had to put the theory into practice, developing sustainability-integrated valuation methods and nudging his colleagues to use those methods. “I built an ambitious impact equities product while dealing with the practical hurdles academics typically do not see, such as clashing client needs and the heterogeneity of companies within an industry,” he adds.

    Meanwhile, being a consultant has helped Schramade to understand the client’s perspective better. “I’ve seen pension funds struggling with dual return objectives and the behavioural challenges of letting go of investment dogmas,” he explains. “Exploring the resistance was very fruitful in finding solutions.”

    “All of these experiences reinforce each other in my new role at Schroders, where I’m in a dialogue with clients on how to invest sustainably and aspire to bring their insights back to my colleagues to help develop better solutions,” he sums it up.

    The origins

    Schramade’s personal sustainability journey started with climate change back in 2011-2012. “I was reading a lot about climate change while my wife was pregnant with our second child,” he recalls. “It made me worry and wonder: what are we doing to our children to put them on this planet in these circumstances?”

    Over time, this worry has shifted and broadened to a desire for achieving just transitions. “Technically, it’s clear we can do this, but the mental hurdles are huge,” ponders Schramade. “So many people are in denial. On the bright side, the tide seems to be turning. And increasingly, pension funds are aiming for the same thing that I want as a beneficiary: not only a decent pension for myself but through investments managed in such a way that by the last quarter of this century, my children too will receive a decent pension in a fair and inhabitable environment.”

    Adding value, the next level

    Schramade is quite clear on his goal at Schroders: to help make the asset manager’s sustainable efforts more visible. “We have a great data machine, with all kinds of tools, such as a very rigorous impact framework, and SustainEx, which values companies’ externalities exactly in line with what professor Dirk Schoenmaker and I propagate in our textbook Principles of Sustainable Finance,” he says. According to him, the challenge is to put that machine to optimal use and make it more visible in the products and services Schroders can deliver to clients.

    The current setup already allows clients to build their customised dashboards, where they are provided with the ingredients that enable them not just to set their priorities but also to see the consequences in terms of investment universe size and characteristics) and track performance. Yet, Schramade’s ambitions stretch further. “The idea is to take the dialogue with clients to a higher level, allowing them to achieve investment returns in a wide sense, not only financial results, but strong social and ecological outcomes,” he explains. “That is the value asset managers will increasingly be expected to add: to deliver not just alpha, but alpha plus long-term value, or whatever you want to call it.”

    The dual return goal

    As it turns out, this vision of building an investment framework allowing clients to achieve the dual return goal aligns perfectly with Schramade’s personal take on sustainable investing. “I believe that delivering social and environmental benefits is not only consistent with long-term return goals, but a pre-requisite for delivering them,” he states clearly. “Unfortunately, the industry is still stuck in the phase of storytelling and excessive reliance on flawed ratings. In my view, the differentiating factor is the rigorous measurement of value in environmental and social terms.”

    The importance of considering environmental and social aspects in value terms can hardly be stressed enough, according to Schramade. Demonstrating that the companies you invest in indeed make the world better, and by how much, is critical. Further, you need to show that the valuation of the “E” and “S” informs engagement and investment decisions. “Only then can one truly take a dual return perspective,” he says. “Typically, it takes time to internalise this thinking. It is probably the most important point that Dirk [Schoenmaker] and I make in our textbook,” explains Schramade. “It was also a key factor in my decision to join Schroders,” he adds.

    A pedagogical, and psychological challenge

    “We in asset management need to get much better and more specific at explaining what we do, why we do it, and how we do it,” reflects Schramade. He believes it is imperative, for instance, to make a clear distinction between investing in projects and solutions that are already sustainable and investing in companies that are on a transition pathway. “Yet it is much more difficult,” he admits. “How do we show that the managers of these ‘dirty’ assets are serious enough in their efforts? And how do we ensure that we are not being too lenient with them, but not too strict either, in our engagement efforts and investing decisions?”

    Above all, however, what Schramade thinks the industry needs is a change in mindset. “We need to get out of our silos and narrow frameworks where risk is just a set of backward-looking metrics that happen to be available,” he says. “Instead, our view on risk-return expectations should also be informed by hard-to-measure transition risks and opportunities. In that way, we can be serious about a multi-decade fiduciary duty,” concludes Schramade.

     

    Image courtesy of Schroders
    Julia Axelsson, CAIA
    Julia Axelsson, CAIA
    Julia has accumulated experience in asset management for more than 20 years in Stockholm and Beijing, in portfolio management, asset allocation, fund selection and risk management. In December 2020, she completed a program in Sustainability Studies at the University of Linköping. Julia speaks Mandarin, Bulgarian, Hindi, Russian, Swedish, Urdu and English. She holds a Master in Indology from Sofia University and has completed studies in Economics at both Stockholm University and Stockholm School of Economics.
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