“The fish rots from the head down” was the closing remark by a panelist at one of the events I joined on sustainable investment this week. He was referring to the crucial role of corporate leaders in creating culture that is both good for the company and the world. Perhaps it is time to change the order of the letters in the abbreviation ESG to GES? ESG stands for Environmental, Social, Governance – investor-speak for the integration of sustainability in investment strategies. Good Governance is crucial to ensure Environmental, Social and all other kinds of performance (not in the least economic), and to build or restore trust.
The second week in October is Sustainable Investment Week in the Netherlands. The Dutch Sustainable Investment Forum (VBDO) organized many events during the week, with many (high-profile) partners such as NYSE Euronext, Triodos Investment Management, Sustainalytics and Vigeo. These events showed the good, the bad and the ugly of the state of sustainable investment in the country that is home to the oldest stock exchange in the world – the Netherlands.
- Netherlands’ pioneers in sustainable banking, Triodos and ASN Bank, show continued growth in their client base and assets under management across 2008-2013.
- There is a growing demand for sustainable financial products and services from individual and institutional investors, and therefore the mainstream banks are also becoming more active in the sustainable investment field. A panelist from ABN Amro Private Equity shared that since the start of the financial crisis there was a sharp increase (in interest) in sustainable investment, mostly driven my intergenerational discussions in the context of wealth management and media attention to various issues.
- Earlier in the year, the Edelman Trust Barometer showed that, in the Netherlands, the trust in Banks and Financials ranks among the lowest in the world.The trust deficit is largely seen as being caused by the culture in banks, driven by compensation and bonus structures.
- According to Sustainalytics’ Trends in Responsible Investment report on the Netherlands “the economic crisis and the general public’s mistrust of financial institutions have put pressure on banks, insurers, pension funds and asset managers to define their role in society and reflect on the social and environmental impact they have or could have through their investments.”
- Too little, too late, or are they really changing the way they do business? The 2012 Eurosif Study on responsible investment shows that the main responsible investment strategy in the Netherlands is exclusion of certain companies. The question remains whether this is due to a fundamental shift in how these investors see their role, or if this is mostly a result of legal requirements banning investments in cluster munitions as of January 2013? A panelist from Aegon Asset Management shared that engaging people within the company was a key sustainability challenge at the moment.
- Responsible investment seems mostly norms and legislation driven – no one talked about one of the big elephants in the room – the carbon bubble of stranded assets (fuel reserves) on the balances of listed oil and gas companies which fuel many pension funds.
- The Dutch government in promoting responsible investment strategies has been very small. Except the new law forbidding financing companies in the cluster munition industry, there are no regulations that require pension funds to adopt a responsible investment policy. In fact, as of January, fiscal benefits for investing in socio-ethical and cultural funds have ended (fortunately, they do remain for green funds).
- The Amsterdam Stock Exchange hosted various events in the sustainable investment week, but failed to show strong commitment to driving sustainability with its listed companies. At the global level, NYSE recently joined the Sustainable Stock Exchange initiative, but this was not even mentioned in the 10 minute history lesson on the Amsterdam Stock Exchange. Fortunately, one of the panelists could connect the dots and discuss how, since the listing of the first company on the Amsterdam Exchange, the role of governance, management and culture has always been crucial to ensure a company’s future and impact
- All the bankers on stage (and almost all other speakers and participants in the audience) in the four events I attended in this Responsible Investment Week were male. One of the speakers even mentioned diversity as a sign of good corporate governance. What does that say about all the banks represented in the many panels?
Financial institutions have huge potential to drive the sustainability agenda, not only integrating sustainability into their own business models, but also ensuring this is done by the many companies in which they invest. But this week has left me quite disillusioned about their real appetite to be part of driving change for a more sustainable economy. Not surprising that there were not too many big fish from the finance pond on the list of the top 100 most influential sustainable leaders in the Netherlands that was published this week as well.