Assessing sustainability through rankings – a complex matter

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23-06-20 12:24 | Our work | Responsible business

Recently, Nordea was highly ranked for our sustainability work by the NGO ShareAction, while we scored relatively low in another ranking/survey.
We understand the confusion this causes for customers and stakeholders, who share our conviction that sustainability is important and strive to understand how sustainably Nordea operates. As sustainability ascends on both corporates’ and governments’ agendas, the need for fair and data-driven measures to rank sustainability increases, but so far there is no perfect yardstick for measuring.

One may think that measuring sustainability should be a relatively simple procedure. Investing in or associating with companies that pollute the environment or fail to take sufficient consideration of social factors should without hesitancy be considered inappropriate for investments, some believe. One problem in assessing sustainability efforts is the lack of common definitions, guidelines and frameworks. Some believe that The UN’s Sustainable Development Goals can aid in facilitating sustainability reporting, inter alia through ‘Business Reporting on the SDG’s’, a collaborative initiative by GRI and the United Nations Global Compact. 

While more and more companies put increased focus on sustainability strategies and action plans, there is yet no perfect yardstick for measuring corporate sustainability, and existing ratings vary tremendously. When it comes to ranking a company’s sustainability performance, environmental aspects are considered but also social and governance aspects, what we normally refer to as ESG . 

Ylva Hannestad, Deputy Head of Group Sustainable Finance

“When ranking results are published, it is easy to get the impression that there is a clear and commonly accepted way of ranking a company’s ESG performance or a generally accepted methodology used by all ranking institutes. Unfortunately, the reality is more complicated than that. To achieve real, long-term change, an understanding of the complexity and challenges businesses and sectors are facing while transitioning to a greener economy is vital”, says Ylva Hannestad, Deputy Head of Group Sustainable Finance.

While excluding certain companies and sectors may make Nordea score higher in sustainability rankings, it would also prevents us from practicing active ownership as a means to transform companies and sectors, so that they may become sustainable in the future.  No ownership equals no influence and simply divesting is not always the best way forward.  At Nordea, we want as many companies and sectors as possible to join the sustainability movement, but sometimes transitioning to more sustainable means of conducting business is a journey that takes time and endurance. Business models, supply chains, and large production facilities cannot be replaced overnight and guidance and support are often needed to ensure a successful transitioning. Of course, when companies fail to live up to our ESG requirements or lack willingness to change, we do not hesitate to divest or exclude companies. Through ownership, we get to vote at AGMs and our voice carries weight, which we can use to push for the changes we believe necessary. Companies and sectors are important societal players, providing employment and contributing to tax revenues in addition to delivering products and services. 

One example of how active ownership makes a real difference is our engagement with pharmaceutical companies and their supply chain management in India, where we use our ownership to diminish the impacts of drug pollution and severe contamination of waterways and agricultural lands. Here you can read the report.  

The financial sector is changing rapidly and ‘sustainability’ takes on a new meaning as new goals, requirements and regulations evolve. A few years ago, the definition was more or less confined to filtering out ‘bad stocks’, such as tobacco, military, or alcohol-related stocks. However these days, responsible and sustainable banking covers a wide range of approaches, as a result of the industry maturing and also increased government regulations as a consequence of the increasingly evident and disastrous effects of climate change and pollution. Taking ESG factors into consideration has become a hygiene factor for modern financial institutions. For Nordea, sustainability means taking responsibility for the impact we have on our surroundings. As one of the largest banks in the Nordic region, we strive to be a positive contributor in society, by enabling sustainable financial products and services and driving change through collaboration with others. 

Here you can read how we work with ESG, the sustainable funds we offer or why not have a look in our latest Sustainability Report?

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