F&P Quarterly: Sustainability – a game changer

November 2017

Sustainability – a game changer

Corporates and investment managers are becoming increasingly aware of the fact that sustainability will be a game changer going forward. The corporate focus has until recently been on complying with minimum standards rather than appreciating that sustainability will be a fundamental differentiator in the eyes of the investors.

At a recent seminar hosted by Fogel & Partners in Stockholm, the topic of sustainability as a value driver was discussed. Per Lindberg, CEO of BillerudKorsnäs, Charlotta Faxén, Fund Manager at Lannebo Fonder and Anette Andersson, ESG specialist at SEB Investment Management shared their views.

BillerudKorsnäs awarded for its sustainability work

Per Lindberg kicked off the seminar with the advice that you need to go as far as to incorporate sustainability when formalising the vision to achieve the desired impact.

“The answer to why BillerudKorsnäs exists is not only to make money. It is to challenge conventional packaging for a sustainable future.”

The work by BillerudKorsnäs has been rewarded by customers, investors and other stakeholders and the company has achieved numerous awards and recognitions.

Per Lindberg also expressed his personal commitment to sustainability which was intensified after witnessing a polluted beach in Zanzibar filled with plastic waste that had been washed ashore.

“It was a disaster and personally I made plastic the main enemy back then in 2006.”

BillerudKorsnäs has over the years introduced a number of new paper-based products with superior environmental performance versus plastic.

BillerudKorsnäs has managed to integrate sustainability into the business strategy and is prioritising it through strategic development work and investments needed to improve the business in a sustainable manner.

The asset management view  

Anette Anderssson, SEB Investment Management and Charlotta Faxén, Lannebo Fonder, both highlighted the importance of sustainability if you are an active long-term investor.

Charlotta stressed that sustainability is a significant part of the overall risk assessment in an investment decision for Lannebo Fonder. She said that they always ask senior executives what the worst thing that could ever happen to their business is, and stated that ESG factors is a substantial part of the risk calculation.

Both Charlotta and Anette emphasised the importance of a strong commitment from the CEO, and for the CEO to actually be the spokesperson on this topic. CEO’s, and other key executives interacting with institutional investors, must have the knowledge about sustainability work, engage in the conversation and not be dependent on sustainability specialists to answer questions about their footprint, focus areas, targets, actions and plans.

Anette Andersson appreciates that sustainability is such a big subject that it might frighten and paralyse corporate leaders into doing nothing.

“The advice is to start small with the topics that are most important to your company and your sector. You need to accept that you are on a journey. You will never be finished and you just need to keep going.“

The scope of sustainability is wide, and it also includes areas such as fair tax policies. Anette said that they regularly ask companies if they have an official tax policy, and she is certain that companies will have to face additional questions on this theme going forward.

“Tax planning can be questionable even if a company strictly is legal, and this is part of the sustainability scope too.”

In summary

The message is clear, corporates need to work strategically with ESG factors in a structured manner with clear objectives. The work should be incorporated in all areas of the business as well as in the corporate culture and the CEO and senior management need to be engaged and lead the work – not leaving it to the sustainability department of the company.

Investors are beyond the phase when it was considered enough for corporates to conform with the general standards in their respective sectors – today, demands are much higher. Businesses should keep a proactive agenda and realise that sustainability will be a game changer. It could, and frankly should, be used as a value driver in the investment case as it will differentiate the business and fundamentally enhance the outlook for the company.