When it comes to sustainability, we are all learners, Birgitte Olsen tells finews.com in an interview. «But political and corporate will is going this way, and we want to deal with it as investors,» Bellevue Asset Management's portfolio manager tells us.
Birgitte Olsen, you have invested more in sustainable family or owner-managed companies. Is it in the nature of such companies to be sustainable?
It is true that owner-managed companies score points for above-average sustainability and consistency due to their stakeholder approach and long-term perspectives. They are interested in long-term value development and not in short-term profit maximization.
Over the past five years, family businesses have achieved above average results in terms of ESG. The reason being that pursuing corporate sustainability also means taking environmental and social issues into account. Seen in this light, «sustainable family businesses» are almost a tautology.
This statement excludes companies that seriously violate human rights, the environment, and business ethics (ESG criteria), as well as those involved in controversial arms deals. In other words, does this mean that you tolerate "normal" arms deals and have no problem with them if they do not seriously violate ESG criteria?
This exclusion criterion is a generally applicable standard to which we are committed as a signatory of the UNPRI. This is formally necessary but far from sufficient.
«This should also provide investors with higher returns»
Our Sustainable Scoring is based on a three-tier model, in which a company's current MSCI ESG rating, rating change (momentum) and Low Carbon Transition (LCT) rating are taken into account.
In addition to this, we actively discuss ESG issues and scores with companies during the more than 500 management meetings we hold each year.
Can you provide concrete evidence that sustainable companies are more attractive to investors not only for their "good conscience" but also in terms of returns?
We believe that credibly sustainable companies gain concrete competitive advantages. Proactive ESG policies can mean, among other things, lower borrowing rates and cost structures for companies, successful retention of talent, more loyal suppliers and customers, and higher barriers to entry.
This positively impacts growth and profitability, and should also provide investors with higher returns.
How differently is sustainability developed among family and owner-managed companies in different European countries?
The leader in terms of ESG in Europe is Scandinavia. It's no secret that in addition to a company's anchor investor, policymakers set the ESG framework and incentives.
«When it comes to sustainability, the saying goes: Rien ne sert de courir, il faut partir à temps»
Norway introduced a CO2 tax back in 1991 and plans to further increase it threefold to over $200/tCO2 by 2030. Finland wants to achieve CO2 neutrality as early as 2023.
In the UN Sustainable Development Report, the top 20 countries are almost exclusively European, and Switzerland ranks 16th out of 193. We want to constitute a diversified portfolio and are finding opportunities throughout Europe. Scandinavia and Switzerland currently represent 37 percent of our portfolio.
Measuring and meeting sustainability criteria is also a costly business. Doesn't this put smaller companies at a disadvantage because they can't afford the expense financially?
When it comes to sustainability, the French saying "Rien ne sert de courir, il faut partir à temps" applies, and it applies equally to entrepreneurs and politicians.
«Finland's Stora Enso is one of our favorites»
To illustrate, Lundin Energy is a Swedish E&P company with a market capitalization of about $10 billion. The company will become CO2 neutral in 2023 and has invested a total of about $800 million over the years to reach that goal.
Around 60 percent of today's production is already certified CO2 neutral. Nestle, on the other hand, despite a market capitalization of 300 billion Swiss francs, has set itself the goal of becoming CO2 neutral, but not before 2050.
When you look back at your investment activities in the recent past. What were some good examples of sustainable family or owner-managed companies that were undiscovered or undervalued, so to speak?
Finland's Stora Enso is one of our favorites. With 2.4 million hectares, Stora is the second largest forest owner in the world. The company has steadily moved away from its original core business of papermaking into sustainable packaging materials, biomaterials and wood products, such as Cross Laminated Timber (CLT), which has become very popular.
«We are very cash flow oriented and want to invest in undervalued companies»
Thanks to CLT, houses up to 30 stories can now be built entirely without traditional structural elements such as steel or cement. Lignode, a wood-based anode for lithium batteries developed by Stora, could also become a breakthrough innovation.
Corrected for the forest value, the stock trades at 4x EV/Ebitda 2021 and is, in our eyes, highly undervalued for a potential "ESG star of tomorrow".
The latest trend in sustainability is impact investing, i.e. investments that make a difference for a better society or environment. To what extent does this aspect feed into your strategy?
We are still very cash flow oriented and want to invest in undervalued companies whose fundamental value is not adequately priced in, also in terms of ESG. Thus, we want to generate an attractive risk/return for our investors.
«Family businesses also seem to be convinced of this»
We therefore do not take a best-in-class approach. By submitting to ESG criteria, companies influence and change their CO2 emissions, for example, and actively contribute to achieving the 1.5-degree target. This has an impact that we believe can be measured in financial terms. Family businesses also seem to be convinced of this.
Which plans do you have for 2022 to further develop your fund and make it even more attractive?
When it comes to sustainability, we are all learners. Some things are still in their infancy and far from perfect. But the political and corporate will are going down this path, and we want to address it as investors.
The consistent focus of the Bellevue Entrepreneur Europe Fund on sustainability is a milestone for Bellevue Asset Management and an opportunity for the Entrepreneur Team to further develop their fundamental craft in the service of investors.
Birgitte Olsen has been working for Bellevue Group since 2008. Previously, she worked for Vontobel and Generali. Olsen is a member of the Bellevue Asset Management’s executive board and is responsible for the investment funds BB Entrepreneur Europe (including Europe Small) and BB Entrepreneur Switzerland as well as for institutional mandates. Born in Norway and raised in Geneva, she holds a degree from the University of St. Gallen and is a CFA charterholder.
