For some firms, sustainability is mainly a new way to market their products without much inherent believe in the importance of the topic, LGT's Managing Director Tycho Sneyers says in an interview with finews.asia.

Tycho Sneyers, how important is the issue of sustainability for the financial industry?

These days, sustainability in asset management is a major issue, possibly the most important issue. For some firms, it is mainly a new way to market their products without much inherent believe in the importance of sustainability, while for others such as LGT, we believe it is fundamental in addressing some of our society’s most pressing issues such as climate change.

When did it all start?

LGT Capital Partners was a very early adopter of responsible investing, as we called it in those days. It all began in 2002 when we won a private equity mandate from the Swedish national pension system (AP7), as they asked us to implement certain investment exclusions based on ESG considerations. Since we thought it made a lot of sense to avoid investing in activities that are harmful to society, we implemented a similar approach in our Crown private equity offerings starting from 2003.

«As is often the case, things take longer to happen than you think they will»

A key milestone for the entire investment industry was the creation of the Principles for Responsible Investment (PRI) by the United Nations in 2006. LGT Capital Partners made the decision to become a member of this organization in 2008, thereby being one of the first alternative asset managers to join. The group of members (called signatories) was much smaller back then. Today, it has expanded to over 2,000 members, managing over $80 trillion in assets. The PRI is the world's leading body and proponent for ESG integration in the asset management industry.

Nevertheless, the development seems to be rather slow. Why is that?

As is often the case with fundamental changes in economies and societies, things take longer to happen than you think they will, and then they happen faster than you thought they could. I expect the development of sustainability to follow a similar pattern.

«We are close to a turning point where the industry will start moving much faster going forward»

The process of turning a concept such as sustainability into action in finance is complex and takes time. Specifically, it takes time for people to change their perspectives, for the legal frameworks and the investment processes to change. However, I think we are close to a turning point where the industry will start moving much faster going forward.

How does LGT Capital Partners position itself in this environment?

For every investment decision we make, we obviously aim for attractive financial returns, but we also aim to making positive environmental and social contributions. This is not easy, however, we believe the broad and deep integration of ESG and sustainability in our investments will be key to our long-term investment and commercial success. As a business, we are well positioned to benefit from the increasing importance of sustainability, due to the following reasons:

  • We were early in implementing sustainability and have built a strong reputation with institutional investors on this topic.
  • We have a strong commitment from our owner, the Princely family, who has a long-standing history in philanthropy and sustainability, and this credibility matters to our clients.
  • Ten years ago, we created the ESG Cockpit, because we wanted to have our own transparent method and our own processes to assess the sustainability footprint of investments. Today, this tool is one of the best in the industry, getting great reviews from clients and provides LGT with a real edge.
  • We achieved very good investment returns from some of our dedicated sustainable investment funds, which proves that financial returns and environmental/social returns can go hand in hand.

Nevertheless, much remains to be done by us – and the entire asset management industry. Our clients pay us a fee to fully assess the financial return, the financial risk and the ESG footprint of an investment. However, often we face a problem that not all relevant data is available to make this assessment.

In addition, the complexity of a portfolio's structure can also make it more difficult to implement sustainability criteria. This means a large amount of hard and complicated work, which requires a lot of time and resources.

Tycho Sneyers is a managing partner at LGT Capital Partners. He has initiated and led the firm‘s ESG efforts since 2002. He has chaired the ESG Committee since its inception and has steered the firm‘s efforts in deeply embedding ESG principles in the investment processes for its various asset classes. Since January 2018 he serves on the board of directors of the UN PRI.