The EU has ambitious sustainability goals – but as yet, no strategy on translating these ambitions into investment opportunities. There are still misalignments between the way our financial systems work, and our urgent need to secure a future for our society. Sasja Beslik, Head of Group Sustainable Finance for Nordea, explains the critical inconsistency between the sustainable development goals countries have agreed and the short-termism of mainstream investments. That mis-alignment needs to be corrected, he argues: and the long-term development of the world depends on reshaping the mission of capitalism to be a force for good.
The New Economy: What are those misalignments at the heart of this sustainability challenge?
Sasja Beslik: There’s a misalignment because the world is running on two completely separated tracks. We have one track where the world has agreed in Paris on reduction of CO₂ emissions; we have sustainable development goals. And on the other hand we have 90 percent of the world’s capital invested without any regards paid to environmental, social, and governance issues.
Pension schemes across Europe – most of them are focused on generating the best possible returns to their customers by investing in industries or in products or in companies that are negatively contributing to sustainable development.
There hasn’t been any particular change in the way how the pension money today is invested in order to generate profit and growth, but also how to contribute to sustainable development. There is no consistency in the approach; the money is still invested like there is another world tomorrow.
The New Economy: So how can incentives be changed to fix that alignment?
Sasja Beslik: I mean, if you look at the way that investments are needed, in terms of making a transition towards a renewable economy, and renewable growth, going forward. 80 percent of that money will need to come from the private sector. The private sector pension schemes and the rest of the institutional money; they need to have a level playing field where the pension schemes have clear guidelines about how they invest, so they don’t misalign investments in one hand and then the national reduction goals in the other one.
Let me give you another example. In most European countries you get subsidies for buying electric or hybrid cars. What happened to electric or hybrid investment products? They are in terms of size and reach much bigger. They are trans-national; they are not only Germany or Sweden or the UK. Imagine a world where you could get tax reductions or reductions on the investment product because that product is having a lower impact on your future than the other one. So these are the things that we need to talk about. And on the political level, this discussion is not taking place at all.
The New Economy: What role have you been playing at Nordea starting those discussions, and in setting the strategy for what you want to achieve in terms of sustainable development?
Sasja Beslik: I used to explain it like this. My sight is not that good, so, if I take my glasses off, this is a mainstream investment. I don’t see everything, but I can make a decision to go or not to go. During the last five, six years, we’ve developed the analysis model – which is the glasses – and now I see you much better.
It’s not only about the information – information is everywhere – it’s about how you value the information you have access to, and how you put that information into the context of your investment.
So we have gradually started integrating understanding in our investment processes by rating companies, by having a dialogue with them, and so on.
An interesting example on a sectoral level: three years ago, we start looking at the pharmaceutical industry – one of the biggest industries in the world – and the impact on the water pollution in their production in India and China related to the efforts of these companies to expand their business operations.
So we engaged a number of companies, we did site visits in India to understand the pollution, and also to see how the companies managing this are better investment opportunities for us going forward because they will have less disruption, they will have less regulation, less penalties and so on.
So either you can invest like this, or you can invest like this. So we prefer to have our glasses on.
The New Economy: With your glasses on, what do you see as the future for sustainable development?
Sasja Beslik: I think the future for sustainable development is actually to find a way to fully utilise the potential of market economy capitalism – the financial sector being part of that – for the forces of good.
We need to understand that the long-term development of the world depends on our ability to reshape the mission of capitalism. and the market economy. And it’s nothing to do with being leftish or rightish or anything like that: it has to do with the fact that we can’t be a force of destruction going forward. And this is something that we need to bear in mind, because the financial sector plays a role, banks play a crucial role in reaching sustainable development goals.
The role of the banks is to support society and build bridges to the future. Imagine how much we could achieve just transforming the way that we operate, and how we invest today, into a bit more sustainable, long-term approach. It will create tremendous change. And this is my vision; I believe that this is the way, going forward.
The New Economy: Sasja, thank you very much.
Sasja Beslik: Thank you for having me.