Evli is driving towards the widespread adoption of responsible investment. Thanks to the integration of ESG compliance into its investable universe, the firm is more committed than ever to safeguarding the future of all its clients. Evli’s CEO Maunu Lehtimäki sat down for an interview to tell us more.
Why has Evli decided to communicate updates regarding its RI and ESG strategies at this point?
It has to do with our corporate culture of delivering more and promising less. We’ve have been doing many different things on the ESG front but, before going out and sharing them with a wider audience, we wanted to ensure that everything is in place. We didn’t want to make promises or mislead current and prospective clients into thinking we are doing something that we are not.
How deep does the commitment to responsible investment run at Evli?
This commitment has come all the way from our board and is also one of our key strategic focus areas. We feel that this is important for several reasons, many of which relate to the climate and companies operating in an environmentally responsible way. We genuinely feel that this is something that our customers want their service providers to take very seriously. It’s not just about “doing good”, it’s also a business necessity and an important competitive factor.
With ESG having so many sides to it, has Evli focused on one area?
While it’s difficult to say that the environment is more important than society or governance, you have to make a choice on where to put more internal focus because otherwise you will spread your resources way too thin. Our internal call was that climate change mitigation should be the main theme in our responsible investing. We see that as the single biggest risk.
What are your thoughts on the widespread allegations of “greenwashing” in the industry?
If you don’t hold ESG dear to your way of carrying out your business, then it’s better not to say anything at all. The worst tactic is joining all kinds of initiatives, like UN PRIs, when you are just doing it for marketing purposes, and nothing will inherently change in your investment process. Unless you change your way of operating as a fund manager, then you are not ESG-compliant.
Therefore, we wanted to ensure that our internal processes have profoundly been changed and we had invested in systems that support us being ESG-compliant. We can now calculate parameters like the carbon intensity of the companies that we invest in, for instance. For us, ESG compliance is not only about excluding certain sectors or companies from your investable universe, but also integrating all these issues into our daily way of working.
Evli always puts the client first. However, is the greater focus on the environment when it comes to responsible investment?
We don’t want to claim that we are trying to save the world because that would be greenwashing. However, we do believe that unless there’s a dramatic reduction in CO2 emissions, bad things will start happening and it might mean the end for thousands and thousands of companies. It will not only make life unbearable for many people around the world but will also have a negative effect on the investor and their assets.
Our fiduciary duty is to help our clients increase their assets and wealth. If we didn’t consider a potentially existential threat to the business environment, then we would be negligent in our role. If we simply close our eyes and take the attitude that it is not our problem, then we would not be true to our clients. This is why we decided that ESG must become a strategic focus area driving everything we do at Evli.
Since this is a work in progress, in what areas does Evli still need to develop?
When ESG began to appear about 10 years ago, the first response by many, including us, was to sort of internally outsource the issue to a small team. But that’s not the way it should be. The whole thing should be integrated into the daily work of every fund manager, analyst and person working at Evli. ESG issues should be fully integrated into your normal work, alongside the traditional parameters used when analysing whether to invest in certain shares or bonds. We are still very much in the middle of a culture change and we are aware that there are still massive steps to be taken.
What has been implemented to help with that change?
There is no one way to go about, it has been a host of things. Obviously, clear communication about what you expect and what you believe, so people see that this is not just greenwashing. Next is resourcing; making sure that there are enough software resources, as well as human resources, to help staff adopt the new way of working. Thirdly, once we felt that all these pieces were in place, we then started to increase our external communication, which is what we are now in the process of doing.
Do you foresee any shift in trends when it comes to responsible investment?
At a climate change seminar put together by the Finnish government about two years ago, I said that we would see a big change for the better once we stop penalising and start rewarding. What I mean is that many take an exclusionary point of view, meaning that if a company produces XYZ and that leads to carbon dioxide emissions then it is excluded from our investments. If we want to make the big change happen, we should be smarter and discuss with the company’s management about their five-year plan to reduce emissions, for example. If they can provide a sensible and trustworthy course of action, then we should reward them.