ESG Matters episode 9: transcript

Transcript

Anna-Marie Slot:
Thank you for joining me for another episode in our 30 for Net Zero 30 podcast series, where I've been speaking to climate action champions across the globe about real steps to take now, to help achieve 2030 goals. Today, I'm very pleased to be joined by Suvi Collin, legal counsel at Mandatum Life Insurance who has extensive experience in sustainable financing and joins us in fact from the Nordics. So Suvi, you are our first Nordic guest into the series, so no pressure there! But welcome. Can you just give us a little background about yourself and your work maybe to start off?

Suvi Collin:
All right. Thank you, Anna-Marie, and thanks for having me. A bit of background, I'm a legal counsel [inaudible] life insurance and as a management company [inaudible], my background is in law. I actually used to be a tax lawyer. And now for the past few years, the main focus area of my work has been either sustainable financing legislative framework, which as you'll know is a quite extensive practice. So my key focus area has been the implementation of this legislation into Mandatum's business operations. So in a nutshell, you could definitely say that the legislative side of sustainability is my focus area and my main area of interest at the moment as well.

Anna-Marie:
So you're the at the coal face, dealing with the thousands of pages that are being published around the EU around sustainable finance. So a great guest to have on our series. Can you tell us what have you been seeing last 18 months or so? Have you been seeing a shift in sustainability and if so, where are you seeing that come from?

Suvi:
Yes, I think we have definitely seen a tremendous shift in terms of how they discuss around sustainability and ESG matters altogether. So ESG and sustainability used to be maybe a bit of marketing matter or a brand matter, a communications matter, especially at the final sector, it has become more and more a compliance matter. So like you say [inaudible] thousands and thousands of pieces of legislation really covering all aspects of financial institutes, separations from sales and marketing to investment decisions, and disclosures. So it really is an extensive package and it has really put sustainability in the forefront of our horizons at least and I would say for all financial institutions. So it does have a significant impact on the business as a whole. And you know, what we are now seeing is the very first wave of this green tsunami. So in March was the deadline for the first level of implementation, what we are seeing is a significant increase of legislation in the coming years. So that definitely put sustainability very much in the focus of everything we do. For example, as a financial institution also from the regulatory side.

Anna-Marie:
Yeah, a really good point, "green tsunami" I like that expression. That's a new one for me. I think a lot of people talk about net zero goals. A lot of people talk about the EU regulations kind of in the broader sense, but you're really implementing it through the organization, which is I think a much more complicated process than people might have originally thought. I mean, can you compare that against anything else, any other regulatory change projects that you've been doing in the past and whether it's kind of more or less?

Suvi:
Yeah, that's a very good question because I just compared to the space of legislation to AML legislation 10 years ago, which really also was a huge burden in a way, and also kind of changed there [inaudible] landscape there. But I actually think this is much more interesting because it is not only a compliance matter, is it? So you know we do have the compliance side and we have this kind of extensive piece of legislation, which still has the communications aspect, the brand aspect, the strategic aspect. So it is not only a legislative exercise, even though it does also have kind of the compliance edge data as well. And that's kind of what makes it quite interesting is actually like who should be in charge of the legislation and implementing it. That it is definitely not only something you did from the compliance perspective, but it also does have huge impact on the strategies of financial institutions and also kind of client facing impact as well, because what we are actually seeing is quite a significant increase in client demand for green products. So that's also one aspect to consider there as well.

Anna-Marie:
Fascinating. So, so one side is the regulatory kind of push, maybe. And another is the investor interest. I don't know which is the push and the pull on that one, but very interesting to see how those two are interconnecting in what you do. Is there one thing, maybe one specific action or one type of approach that needs to happen? Do you think in the next couple of years to really be a game changer around delivering on net zero and delivering sustainable finance?

Suvi:
Yeah, I think that is a very good question. And in the big picture, what I think should happen is that we should learn how to put a price on the principle adverse impact of different business operations. So in the legislation [inaudible] got the principal adverse impacts, so the PAIs, which is kind of the key aspect of what we are evaluating going forward is that different principle adverse impacts of our investments and targets companies. [inaudible] should happen is that we should learn to put a price on them. So as you know, that at the moment, there really isn't a way or any legislation. For example, if we were to require a company to disclose their impact on sustainability and on, for example, climate goals. Many companies have done this, obviously voluntarily, they have seen it as a marketing matter, as a brand matter, or for some other reason have decided to do that.

Usually the companies that are making progress there, but there really hasn't been any obligations to do that so far which has maybe left a situation or resulted in a situation where the negative impacts of different business operations hasn't really been accounted for in the valuation of different companies. So what I think should happen is that companies should be obliged to disclose how they approach sustainability and different sustainability factors, how they take them into accordance and what is really their impact on sustainability? And then we, as financial institutions can take that into accordance when they make the investments.

And that's actually also one of the key pieces that is missing from the regulatory puzzle as well. If we're saying we have this quite significant disclosure obligations towards our customers, but at the moment, there really isn't any obligation on the underlying companies, even though that is where the real change needs to be made.

So we really do need to see changes on the level of the companies and my solution there would be a mandatory reporting on sustainability factors. Which there actually is a draft legislation pending at the moment. So let's just hope that that will kind of be ambitious enough to allow us to really make a change there and really account for the negative impacts of the different business operations. Of course, hopefully would result in the companies that have less sustainability, and are less negative sustainability impacts their operational conditions.

My one key aspect that I would like to see in the upcoming months and years, and what is missing in terms of who should do this, obviously in the European context, I do think it's a European legislator. It should be a European [inaudible] kind of standardized disclosure or reporting obligation, but the short answer would be put our price on the PAI.

Anna-Marie:
Really live and interesting question right now, right? How do you price impact and that people, I think from the kind of pure impact background have been working on, I know there's a lot of industry groups trying to figure out, how do you price the impact of something? And then we have, of course the SASB and the accounting standards talking about whether or not you price it through an accounting lens. And then you've got disclosure like TSD, which is a forward looking type of assessment all at the same time. A really interesting point, Suvi. A very important one in terms of getting businesses really align on sustainable structures, really for their own business. Are you seeing any movement in terms of how people are approaching these requirements and these thoughts around sustainability between... does it continue to just be a compliance aspect of business?

Suvi:
Yeah, [inaudible] I have seen quite a shift there. So, first coming from communications, brand building and compliance and risk management, and now it's more and more becoming a key statistic matter and really a [inaudible] value creation, which really is the most fascinating part of the change. So they have, for example, [inaudible] and investing in the past used to be maybe excluding certain sensitive areas of business and really focusing on sustainability of climate risk. And now we are discussing more and more what is the investment opportunity here? How [inaudible] that really kind of ESG is very much embedded in all investment decisions and integrated really in everything, what we do for example.

And for example, in private equity, one of the key aspects that we look into when making investments is the ESG factors of the different target companies and how to best create value there. So it's definitely becoming a key strategic element instead of a compliance matter or maybe something that is just added on top of the investment process. So now it's very much integrated in everything that is done. So that is definitely a key change that hasn't happened in the past 12 months maybe.

Anna-Marie:
If I could just ask you, is, do you have your own personal commitment to any kind of net zero or any kind of a behavioral change over the next kind of 12 months, year and a half?

Suvi:
I actually have two, so I would divide them on a professional level and then on a more personal level. So from a professional level, I have kind of not really focused on sustainability, not only from the legal side, but also kind of the bigger picture, the investment side, and really focusing my professional efforts in really improving and continuing to be at the forefront of the change. So that is really something that I have actually in the past year maybe, really focused on and hope to do going forward even more so.

On a personal level, I have actually already three years ago made significant changes to my diet, which I think is actually the easiest way for many of us actually to have an impact. So I really did put the environmental aspects of my diet into the very center. I know in practice, this has meant excluding red meat and dairy and eating very moderate amounts of fish and chicken.

And then the main basis of my diet is vegetable, so plant-based, but not completely vegan and I have actually been eating this way for the past few years. So it has been very sustainable also from the [inaudible] perspective, but also from a personal perspective and I have really felt great and have a ton of energy. So it's just something I can probably recommend for everyone to try and maybe not go full on vegan. But just make tiny changes and tweak it along the way would be my recommendation.

Anna-Marie:
Excellent. So we can call you for recipe is on how to, how to continue to, to have variety in your diet. Huh?

Suvi:
Yeah. That's legal tips and recipes. Yeah.

Anna-Marie:
That's a good combination, I guess last question for you. You did talk about what role you think the regulator takes, but is there a specific person or organization that you think if they were listening in right now that you'd ask them to do or some action to really deliver on this net zero?

Suvi:
Yeah. I would like to maybe would like to address kind of all companies, in terms of... I don't think this is something that any of us can do by ourselves. So it's very much a collaborative effort and I think all companies and all businesses should really pay attention to what they are doing and how it is done. But even more to what is being provided and manufactured and how it can be done in a more sustainable and better way. And really go through the supply chains and the end products and see where there is room for improvement.

And I have said you have one very practical tip, also coming from the legislation, because we do have, now the kind of principal adverse impact indicator list provided by the European legislator, which actually really has a list of indicators, including, for example, CO2 emissions, areas of business, [inaudible] located in biodiversity, sensitive areas, in terms of biodiversity for composition, a lot of different indicators that may serve the sustainability impact of the companies.

So what I would really do is kind of go to this list and really reflect the business and or business operations against that list and see which ones are the ones that are relevant for the business and where the maybe is room for improvement [inaudible] . It really does provide for a very nice starting point, especially if this is something that maybe hasn't been considered that much before. So it is a very nice toolbox that can help with aligning the business goals with the Net Zero targets, so that it definitely something that that can be done.

And it's also very good because it's something that we as finance institutions will be implementing in the next, well, nine months actually. So it's going to give you a bit of a heads up there because it is very likely that you [inaudible] these kind of questions from us as well.

Anna-Marie:
Excellent point, an excellent point. So I think key takeaway here is in your next planning session to sit down around a table with the list of principle adverse impact, put out by the EU and really just talk about where that hits your company and what you're doing around it. So that when Suvi calls, you have the answers. She can roll it up into her reporting as well. Thanks so much for your time today, Suvi, we really appreciate you sharing the journey that you've taken so far and the really practical tips to take away from this conversation. So appreciate your time.

Suvi:
Perfect. Thank you very much for having me.

Speaker 3:
Thank you for listening to this podcast. We hope you found it worthwhile. To learn more about the issues we've just covered, please visit www.ashurst.com/podcasts. This 30 for Net Zero 30 episode is just one small part of our continuing podcast series ESG Matters at Ashurst. Make sure you don't miss any of our future episodes by subscribing via Apple podcast, Spotify, or wherever you listen to your podcasts. While you're there, you can also listen to our other episodes and leave a rating or review in the meantime. Thanks again for listening and goodbye for now.