How do investors view the importance of sustainable business?

10 September 2021 | News

By Louis Attlee

The Global Mutual Leaders’ Symposium was held in London and Sydney on 8th September. It was an opportunity for leaders from both countries to come together to discuss mutual business purpose and how best to engage with the growing focus on ESG frameworks and investing.

After opening remarks from Melina Morrison, CEO of the Business Council of Co-ops and Mutuals in Australia and Peter Hunt, Managing Partner at Mutuo, a consultancy for co-ops and mutuals, the talks kicked off with Geoff Summerhayes, Senior Advisor of the Pollination Group.

Geoff spoke about how “fossil fuels are embedded in everything…” which must come out if net zero becomes more than a distant possibility. One of the running themes of the whole event was leadership, and Geoff honed in on this astutely, emphasising the need for management to take the lead on building buy in with members and communities.

Next was Jonathan Labrey, Chief Strategy Officer at The Value Reporting Foundation, the leading global standard setter for sustainability reporting. Jonathan outlined the history of corporate reporting frameworks, and he communicated how the different epochs of corporate reporting inform our current approach to the question.

Since the millennium, Jonathan argues, we have seen the transition from a scramble to include all global risks of a seismic nature into a framework, what he called the “end game phase”. Then came moves to incorporate the “six capitals” which represent the needs of all involved in a sustainable business environment. Currently, efforts are centered on moving away from thinking about ESG as a silo, to more of an overarching business strategy. Jonathan expects big things from COP26, where he wants to see solid steps towards global alignment on ESG reporting. We agree, and see a crucial part to play for co-ops and mutuals in contributing to this agenda, and not getting lost in intellectual debates which have preceded earlier conversations on ESG.

Barry O’Dwyer, Group CEO of Royal London Insurance, came after Jonathan, and he took more of a cautionary tack in emphasizing what he called a just transition towards net zero. Barry was careful to outline the need for good stewardship of this new agenda, “partly it is the right thing to do, partly because we need people from all parts of society to come with us on this journey.” We couldn’t agree more.

Barry has inherited a rich history of ethical investment at Royal London, which has the longest track record of ESG investments in the UK. By investing in the right businesses, who care about communities and the planet, financial mutuals such as Royal London play a big part in shaping a better future, while corporate competitors who are forced to comply to shareholder directives.

In a mutual bank, commercial success and customer prioritisation are the only two objectives of management, no shareholders means less pressure on management to deliver other objectives which exist with corporate competitors.

Louise O’Brien, CFO of Bank Australia also sees this as a major advantage. In terms of the operational running and marketing of Bank Australia, Louise simply commented that they don’t “try to compete with corporate competitors, we simply continue to raise our own standards…” On becoming a B Corp, Louise adds this transition “didn’t mean changing what Bank Australia was doing, it just meant communicating our strong track record as an organisation.”

Rohan Lund, CEO of the National Roads & Motorists’ Association, followed Louise’s contributions to the symposium who in true Aussie style, was uncompromising in how he described the core strength of coops and mutuals: they “Can’t be bought, can’t be bullied.”

Like all businesses coops and mutuals exist to make owners happy, but unlike competitors, the owners and customers of coops and mutuals are one and the same and of a much broader demographic of the overall population. This means they are at a structural advantage when taking on competitors, especially in the long-term.

Esther Kerr-Smith, CEO of Wealth and Capital Markets at Australian Unity was next. She argued that “lifelong wellness, economic empowerment, and community connectedness” are the three tridents by which Australian Unity conducts itself.” Also, the reality of no shareholders means these objectives are delivered, not just talked about.

Dialing in from Manchester, Ruth Woodall, the Sustainability Reporting Manager for the Cooperative Group, was sharp in her analysis of why standardized metrics are important to “make sure ESG is not just a box-ticking exercise”. She presented the Co-operative Group’s globally recognized sustainability report for the audience.

This is important given Colin Melvin from Arkadiko Partners UK was up next and used his experience of being involved in ESG from the get-go to explain why ESG needs to be driven by coops and mutuals so it does not become the new CSR. What we all need is evidence of change, towards articulation of actual impacts in the real world. Climate change action needs to find its “nexus in the space between governments and industry”, so words are matched to actions.

Jim Parker represents, Dimensional Fund Advisors, and was keen to emphasise the importance on maintaining good quality data, partly  because different ESG measurements do different things, but also so that coops and mutuals are proactive in aligning themselves and partners to ESG strategies.

Hans Georgeson, CEO of Royal London Asset Management, is clearly very excited by the change that is currently happening, but he is also keen to show this doesn’t mean business has to suffer as a result. It is important that “mutual asset managers remain profitable so that more dividends are transferred to financial mutuals, so that members continue to receive market leading financial products.” Hans is keen to move away from passive index tracking, towards ‘tilts’ which are meant to help partners who are willing to transition, but who maybe have a history with fossil fuels, for example. His three main tips for those involved in the ESG transition were; 1. Make your money count, 2. Make your votes heard at a board level, including actions such as divestment, and 3. Make sure to engage with staff and clients because they will reward you.

Hans, like the earlier speaker has worked for corporates most of his life. The transition, he describes, “coming from a PLC world to a mutual world is a breath of fresh air.” This still means marketing is essential, and “how you represent yourself in the market place in the UK must be in terms of longer terms profit horizons which can be fed back into services”, rather than relying on the ‘goodness’ of the business purpose. This tallies with Mutuo’s view, that co-ops and mutuals must prove their worth to society, rather than relying on the clarity of their purpose.

As announced at the end of the event, BCCM is launching its new ESG project for co-operatives and mutuals. The program will commence next month and I would like to invite your business to participate as a project partner.

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