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ETF Digest

The Road to Sustainability


19 May 2020


ESG reporting is a start, but there is much more for us to do to create a sustainable world. We have a tremendous opportunity ahead to stimulate green growth. At ETF, we focus on sustainability through innovation.

I want to live in a sustainable world.

My passion was fired up at the Copenhagen Climate Change Conference in 2009. Living as a student in rural Sweden just across the strait, I saw world leaders from 110 countries meet to discuss only one topic. Climate change was the battleground. I became acutely aware of the reality of climate change and wanted to be part of the masses shouting, ‘Action Now!’ For many of us, it was not then clear what ‘Action Now’ should mean exactly, but the conference highlighted that green growth was the way forward.

Over a decade on, I remain an optimistic activist.

People clearly want to live sustainably, and equally clearly recognise the need for change. As a result, investors are now really grappling with the concept of green growth. From the small realisations (I used to love individually wrapped chocolates – now I shudder at the thought), to overhauling business as we know it (university endowments starting to divest from fossil fuels), there is ‘action’ on many levels in our world today. There are many approaches to achieving that, and so there is far greater emphasis on measuring sustainability.

You can’t hit a target without aiming at it.

So how, and at what, are we aiming? Since my first job in finance, a company’s most accessible means for attaining sustainability was to measure up against Environmental, Social and Governance (or ESG) goals. Today, the myriad of ESG indices, and the tide of companies reporting on their scores, are a testament to how popular it has become. Many investors demand that companies work to improve their ESG scores – a company with good environmental, social and governmental credentials is deemed to be more successful and resilient.

That is, simply, not going to be enough to turn the tide on climate change.

To be sure, increasing ESG scores is laudable. However, it doesn’t tell us much about the sustainability of a company’s actual business model, as ESG is mainly a measurement and control of internal processes. A high ESG score doesn’t mean that the company is working towards green growth. For example, many oil companies have high ESG scores because of a high level of disclosure and good governance. Closer inspection reveals the inadequacy of ESG as the ultimate benchmark for sustainable investments.

To develop a sustainable society, we should look to invest in companies with a sustainable commercial model.

ETF’s philosophy – sustainability through innovation – is to do that by finding entrepreneurial companies whose business models use innovative technology to achieve and facilitate green growth. Change breeds opportunity. Young and innovative companies are taking advantage of that opportunity by re-imagining the ways business can work. ETF’s investments make deliveries more efficient, help ships reduce their emissions, create new leather out of waste, prevent food waste, and reinvent mobility. And more.

In Copenhagen in 2009, I realised that climate change was real, and that the consequences of inaction would be devastating. How inspiring it is to work with entrepreneurs prepared to take ‘Action Now!’ Working together, we can make the world a better place.

Kajsa Johansson

Excited to have joined ETF in early 2020, as she always had a passion for sustainability. Kajsa has been busy working with ETF’s latest portfolio investment, DeepSea Technologies, and is now focusing on our next exciting investment (watch this space!).