In a new feature that puts the spotlight on those responsible for the investments of European pension funds, European Pensions chats to Elo chief investment officer, Jonna Ryhänen, about the rapidly changing ESG expectations

How can institutional investors maintain a consistent approach to sustainability despite changing political landscapes? And, linked to this, how will Elo manage the ‘loss of predictability’ that you write about in your recent blog on the issue?

You must have your own sustainable investment principles and adhere to them, even if political decision-making changes. Of course, it is good to update principles often enough to respond to changes in the investment environment, but certain long-term principles will certainly remain in the big picture.

Those principles are related to your investment beliefs and values, like environmental issues (climate change, biodiversity). Investments must be diversified even better than before across different geographical areas, industries, and individual investments. This way, political risks can also be better managed.

What will be the impact of a divergence between the US and Europe on sustainability for investors? Is there a risk that European companies will be held to higher standards than their US counterparts?

Regulation strongly guides responsibility as well, so at least for now, it seems that the divergence is real. Perhaps ESG issues will play a more important role in coming years, when the difference between different countries is even bigger? Investors, for example, need to decide based on their principles if they want to invest in a USA or European company in a certain sector, taking into account the difference in regulation and standards.

Are you disappointed by ISS’ decision to remove diversity considerations for US boards? Why is diversity in corporate boards seen as a key factor in achieving better long-term results?

I am not disappointed, but somewhat surprised at how quickly certain things have changed with the new US administration. There are studies and empirical evidence that companies with diverse leadership perform better in the long term. When making different decisions, diverse leadership brings different perspectives from various backgrounds to support decision-making, which can lead to better decisions and results.

Already, the Trump administration has been a catalyst in shifting views on diversity and on sustainability – are you concerned that other aspects of ‘ESG’ could also be impacted?

This is certainly to be expected.

Another topic that has seen changing opinions in recent years has been defence investing – what is Elo’s position on this sector?

Elo has been able to invest in the defence industry before. We have excluded companies that produce controversial weapons, but we may invest in companies that produce components or services that can be used in such weapons (so-called dual-use items). However, Elo does not have a specific strategy regarding defence sector.

Will Elo be making any changes to its sustainable investment policy this year?

We are not making any major changes

How important is it that institutional investors continue to collaborate on ESG issues?

This is important in the future as well. Together, our impact improves.

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