Richard Gröttheim is the Chief Executive Officer at AP Fonden 7. He was previously Vice Chief Executive Officer and has been an Acting Chief Executive Officer. Gröttheim has held this post since April 2000. Prior to that, he was the Head of the Monetary and Foreign Exchange Policy department at the Swedish Central Bank. Gröttheim also served as the Chief Economist at the Swedish brokerage firm, Aragon Securities.
Niklas Ekvall, Ph.D., is the CEO of AP4 as of October 1, 2016. Dr. Ekvall has extensive experience from managing both organizations and specialists in the financial sector and especially within asset management. He has held leading positions at, among others, Nordea, Carnegie and AP3 and has substantial experience of managing financial risks. Dr. Ekvall has a solid academic background and has been active at the Stockholm School of Economics.
Christopher P. Skroupa: How do institutional investor inquires in gender diversity positively affect ESG integration?
Richard Gröttheim: By engaging with companies and getting them to improve their gender diversity. That will have positive effect on the long-term performance of the companies, and the ESG integration will have the intended effect.
Niklas Ekvall: When you say “investor inquires in gender diversity,” we think of our efforts in corporate governance and our work to promote diversity on the boards and also on operational levels within companies.
Our long experience from nomination committees of Swedish companies as well as academic research both point to the benefits of diverse boards in general. “ESG integration” is when we, as institutional investors, integrate ESG assessment into the investment process.
The degree of ESG integration can possibly be measured on a qualitative scale, from certain ESG checks –– often for risk control purposes –– to a more seamless integration where ESG consideration is part of many aspects in the assessment of an investment. To us, our corporate governance activity is one important part of ESG integration into the investment process.
Skroupa: How is the financial sector affected by ESG integration?
Gröttheim: First of all, ESG integration can mean different things for different investors. There is a range of methods for integration. All from indexes, from engagement to blacklisting. You need to use as much of the toolbox as possible, but I do not believe in streamlined index methods.
It is better to engage with companies and use voting, and as a last resort put companies on the blacklist. By trying to change companies’ behavior to get them to be more sustainable, the financial sector can get the companies to perform better and create more value to their investors.
Ekvall: Over the past ten years, ESG has developed from being viewed by the financial industry as more or less a short term cost item, to today an opportunity for enhancing investment return and controlling risk as well as also a necessity for your license to operate. Today, almost everyone wants to be able to say that they are sustainable, then of course the degree of “true” integration varies substantially.
The demand for more quantitative and qualitative ESG information in order for businesses to manage ESG factors and for investors to integrate ESG in their management is rapidly increasing.
Awareness has risen and depending on how well you integrate ESG factors in your business long-term, that can be a factor to determine your future success. The challenge for the industry is to extract more and reliable ESG-information in order to be able to make more informed decisions.
Skroupa: How do institutional investor inquires in gender diversity relate to ESG integration in the financial sector?
Gröttheim: As mentioned before, it is a question on what approach you take on integration as an institutional investor. By using the entire toolbox of things you have as an institutional investor it is easier to get the positive effect on, for example, gender diversity. That is also important for the long term value of the companies.
Ekvall: Our work as institutional investors is to promote diversity on the boards, as one specific activity that is part of our broader ESG integration work. More women on higher management levels in corporates is important, in all sectors, not only in the financial sector, because the higher management levels are among the main sources for finding board members.
Skroupa: From a management point of view, what importance does ESG integration have on both gender diversity and asset management in an organization?
Gröttheim: It has great importance for both the gender diversity in itself, but more importance on the long-term value of the companies.
Ekvall: Our own experience as well as academic research both point to the benefits of diversity within organizations, on board as well as at the operational level. Companies that are good at considering ESG aspects are often well run companies with better HR structures and processes in place to better develop and promote competence within their organizations.
Gröttheim will be nominating someone from AP7 to take his place with Ekvall as a panelists for the discussion Institutional Investor Inquiry in Gender Diversity: Highlights of Recent Engagements in Scandinavia and Beyond at the ESG Integration Summit at Nasdaq in Stockholm, Sweden on August 29.