What do you do at your organization in terms of Sustainability?
I am the Chief Strategist and Head of Sustainability at Bank J. Safra Sarasin. Sustainability is embedded in our brand and our DNA. Sustainable asset management of funds and mandates is the core of our business since more than 30 years.
What is special about our approach is that we integrate sustainability into each step of the investment process.
It is the job of my Research team to run the sustainability tools, research engines and databases that enable the asset managers to manage sustainable portfolios. We truly believe that applying ESG (Environmental, Social, Corporate Governance) data and analyses where it makes sense can help raise the level of insights into our holdings and lead to a better investment outcome.
How do you monitor and report (non-financial reporting) the outcomes and what are the goals?
The outcomes are constantly being monitored in our risk management systems. Portfolio managers can see the ESG ratings of their individual holdings and the average ESG rating of their portfolio. Furthermore, adherence to our sustainable investment process is monitored by Risk Office and the external custodian. If a security is not part of our sustainable investment universe, this is being flagged and the portfolio manager will have to take action and sell it.
Portfolio managers can also monitor and adjust the carbon footprint and the exposure to potentially stranded assets in the oil and gas sector or utilities sector on a daily basis. As the world transitions from fossil to renewable energy, investors will need to reduce their exposure to the former over time to reduce financial risks stemming from upcoming carbon-related regulations. In May 2020, we publicly committed to the Paris Accord. We pledged to align portfolios for a carbon-neutral outcome by 2035, preempting what is required within 15 years.
The objective is to reduce the carbon footprint of the portfolio over the next 15 years to reach net-zero emissions. We believe that this will hugely reduce the financial risks stemming from climate change.
Last but not least, the outcomes of our portfolio analyses are reported to our clients. Besides the climate-related data and the ESG ratings, our standard reporting comprises a section on controversies, reputational risks, key issues as well as the turnover achieved with solutions embedded in the portfolio that directly target the UN Sustainable Development Goals.
What do you think does an organization need if it wants to start introducing CSR/Social Impact/Sustainability practices?
According to my experience, Corporate Sustainability is a journey. It takes bold steps and concrete milestones, but you cannot expect to reach the goal at once. Go step by step, start with the quick-wins and follow your strategic plan.
Most importantly, the drive towards sustainability requires leadership. The commitment of top management is crucial to drive the change. It is all about changing the mindset which needs top-level attention. At the same time, the drive needs to inspire and infiltrate all areas. A successful concept is to appoint ambassadors throughout the organization who have the sustainability mindset and can help you drive the process on the ground. In the end, sustainability needs to be owned by everyone in the organization, not just the Corporate Sustainability Manager.
Do you feel that differentiating yourself through sustainability has brought an added value to your business and reduces risks? In what way? When we started sustainable investing thirty years ago, it was only a niche offering, albeit a profitable one. Some people saw it as a fad, but looking at the climate data, we anticipated that it will become a big trend. After the turn of the millennium, it was clear that we should focus even more on sustainability. We added the caption line “Sustainable Swiss Private Banking since 1841” to our brand. As sustainable investing grew and moved into the mainstream after 2010, we have been well positioned to reap the benefits. The topic of the coming decade is regulations with the EU Action Plan and the Green New Deal. We are well prepared for it.
Over the years, I have been repeatedly confronted with the idea that sustainable and impact investing means renouncing to returns. My experience is that it was and is the business and investment opportunity of a lifetime.
As governments introduce regulations to further the UN SDGs, aligning portfolios with them will provide huge opportunities.
Do you see a change in behavior among your client base? Yes, very much so. More and more investors are approaching us and want to find out how they can invest sustainably. The drivers for this development are multiple. Many companies are defining their sustainability strategy and align their Treasury and pension plan with it. Pension funds are more and more required to disclose the sustainability risks in their portfolios.
Boards of trustees of foundations strive to align their funds with their mission. Large university endowments and pension funds see themselves as universal owners of the economy. Thus, they assume their responsibility to be stewards and use their voting rights to guide the economy towards more sustainable activities. Public investors whose portfolios are scrutinized want to avoid reputational risk of financing human rights violators.
The same is happening on the private client side. Wealthy families want to actively make a change and invest in impact investments. We also see that the school strikes have had a lasting effect with daughters asking their fathers how they invest their money. An academic study by the Universities of Zurich and Harvard shows that if asked whether they would like to invest sustainably with the same risk-return profile, most private individuals would opt for sustainable investments.
How do new technologies and this digital age influence your work? Do you use them?
Thirty years ago when we were in an analog world, we collected our own data and created ratings by hand. As the digital age has arrived, we are running large databases with long program codes and machine learning. Now, we do not collect the data ourselves anymore. There is a multitude of data providers and large datasets out there. Our expertise today is how to process the data and how to interpret it. Modern asset management is effectively data management. The additional sustainability data give us a competitive edge and a better vision of each investment case.
In your view, what’s the biggest challenge when it comes to marketing CSR and Sustainability efforts to the world in a more active way than merely through your sustainability report?
There are certainly opportunities in marketing your sustainability efforts beyond the CSR report. The simple reason for that is that “sustainability” has a positive connotation.
The alternative, being “non-sustainable”, means you will not last; and that just doesn’t make any sense.
But what you need to make sure in your sustainability marketing efforts is that they are credible. There is a lot of “green-washing” around and customers and journalists become ever more allergic to this. Your efforts should be honest and genuine. They need to fit into your overall strategy to be credible, but they also need to be concrete and specific enough to hold up in basic fact checks. But if done right, sustainability marketing will reverberate well with your clients. Over time, I believe that companies will just not be able anymore to market themselves without referring to sustainability. Humanity faces huge challenges in the next 100 years and every company will have to demonstrate what it does to mitigate them.