How corporates are creating sustainable shareholder value

We tune into the expert panel at Nordic Sustainable Finance Conference to understand, how sustainable shareholder value is created.

The annual Nordic Sustainable Finance Conference hosted a series of a panel discussions and under the heading of; “How are corporates creating sustainable shareholder value?”, we heard from Mette Aagaard, Executive Consultant, Spencer Stuart, Mathias Leijon, Global co-head of Corporate & Investment Banking, Nordea, Topi Manner, CEO, Finnair and Berit Svendsen, EVP and Head of Vipps International.

Creating sustainable shareholder value

The first question raised was; how is leadership changing regarding sustainability? Mette Aagaard from Spencer Stuart, one of the world’s leading global executive search and leadership consulting firms, was first to provide insight: -even with stock markets being bullish, leaders of today have to deal with an all-time high anxiety and fears that are difficult to manage, because leaders are still obsessed with numbers and figures of the current state of corporates whilst having a focus on broader systemic risks and long-term horizon.
 
Mette Aagaard Investor and analyst still live within the remit of profit and loss and those parameters are not retiring just yet, but at the same time leaders must concern themselves with the long term ESG horizon. Consequently, when recruiting top management with an ESG focus, as recruiters we look at the candidates with the lens of experience and capability, Mette emphasized.

Regarding experience, there is a metric to view when looking at banks and how they perform on the ESG agenda in order for us to source talent for ESG. We look at Refinitiv ESG scores, and we notice that among the 166 banks, it is quite apparent that Australian, North American and Europe banks score very high. When we zero in on Europe we notice that Europe has an ESG score of 70 on a scale to 100.

When eyeing the Nordics it reveals a higher average than the regional European banks, yet when comparing to neighboring markets such as the Netherlands and UK we notice ESG scores up to 90-91. Thus, it’s not a surprise that we see an over representation of ESG leaders with those nationalities.

Those ESG-leaders have three main characteristics; being visionary and forward looking, strategic thinking and systemic thinking and lastly being influential and collaborative, Mette concluded.

When having outlined these characteristics, focus turned to Finnair CEO Topi Manner, who was asked how Finnair secure good ESG leadership. The audience learnt that Finnair’s talent Topi Manner 2management looked for those before mentioned characteristics, in particular systemic thinking. Topi explained his vision of technology and investment being the source for solutions to some of the biggest sustainability issues we have in front of us, climate change being one of them.

Sustainable aviation and reducing the carbon footprint in aviation, technology play an all-important role; new engines and new types of air frames are all vital. When Finnair introduced the new Airbus 350 for their long-haul flights the fuel efficiency that directly translates into reduced carbon emissions was reduced by 25%. When Finnair review their 5-years strategy and do the classic payback calculations, Topi explained, they also try to identify the aligned incentive. Meaning the natural economic incentive should align with environmental and social incentives. An example thereof is the natural incentive in the aviation industry to reduce the fuel burn which align with the environmental, social and economic considerations. When this alignment of incentives drive investment in technology, we manage to create sustainable shareholder value, Topi concluded.

Berit Svendsen Berit Svendsen, EVP and Head of Vipps International, the leading Norwegian smart payment company started off by stating that the banking and finance industry in the Nordics are ahead of many other countries. In Norway and much so in the rest of Nordics, we move towards a cashless society.

In Norway only 11% of all transactions are cash compared to the EU average of 79%. Even though such a small portion of Norwegian transactions are made through cash it does carries a cost of 3 bn Norwegian krona to administrate. The benefits for society are not only the ease of payment but the removal of storage needs for cash etc. But there is also a positive environmental impact. The continued development of online banking services such as multi-purpose identification tools (BankID/ NemID) reduce the need for physically identify yourself against banks, authorities

etc. and by that minimize transportation and environmental footprint. By exporting our technological achievements in online banking services to the rest of Europe and beyond, we could positively impact the environmental footprint on a wider scale and create a sustainable shareholder value on a bigger scale.

Struggles in ongoing ESG work

Berit Svendsen added the perspective that is a necessity when trying to capture sustainable shareholder value, that corporate leaders look beyond their own industry to discover cross-border opportunities in other industries. With outset from her own industry, the online payment industry, she highlighted the need to act as facilitator for other industries. – For example, we could develop and provide solutions for the transportation industry. We may not facilitate more buses or more trains, but we could provide better payment solutions to the industry and thus making it easier for society to use public transportation in a larger extent than today, she explained. To uphold and create sustainable shareholder value, Berit encouraged business leaders to look towards technology innovation to solve environmental issues and put those solutions to work as urgently as possible.

Sustainable shareholder value in the banking industry

Regarding the banking industry, Mathias Leijon, Global co-head of Corporate & Investment Banking at Nordea, gave his view to why the Nordics has been a driver in these technological achievements.

Mathias Leijon PanelMathias offered that part of the explanation is that, the Nordics have enjoyed a relative political stability and furthermore, with strong institutional ownership as long-term investors, it allows for corporate management to create long-term strategies that include a sustainability agenda. With Nordic corporates being global in their approach, banks have played a vital role in supporting their global expansion, Mathias added.

Commenting further on the role of banks, Mathias eluded to the UN sustainability goals and the principles for responsible banking, nowadays, even if Nordea was one of the founding banks, we have 150 banks accounting for 46 Trillion USD under assets, that will commit and sign on for these principles.

Beneath this there are the vital discussion on commitment on climate change with focus on sectors and industries that are considered as heavy polluters. Nordea and other banks will commit to within 3 years to publicly disclose targets for how we are to deal with these industries and support their transformation. As such, I would say that Nordea and other banks are gradually contributing to improved ESG performance on a larger scale and a such contributing to an increased overall sustainable shareholder value., Mathias stated.

Advice for the future?

To uphold and create shareholder value Berit Svendsen encouraged business leaders in the audience to look towards technology innovation to solve environmental issues and put those solutions to work as urgently as possible. Mette Aagaard offered the advice to the gathered business leaders to train and challenge the short-term vs long-term thinking, this will inevitably lead to sustainable shareholder value being unveiled.

Topi Manner focused on the challenge for leaders to understand the big picture and the interconnectedness, i.e. the systemic thinking approach. Mathias Leijon emphasized that to be successful in the creating sustainable shareholder value, we need to realise that these are interesting times, and we need to be more open to engage in new partnerships within and outside of our industries. As a final remark Mathias added; -do not forget to have fun as it allows you to release creativity that is needed to solve environmental challenges ahead of us.

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