“Sustainability has to be built into the company,” say Claus Jørgensen and Dr. Felix Brill, respectively CEO at VP Bank (Luxembourg) SA and Chief Investment Officer at VP Bank AG. Interview.
How are your clients’ needs evolving?
Dr. Felix Brill: They have been affected by Covid-19 and came to us with many questions regarding the consequences of the pandemic, but also with new needs and demands. Particularly, there has been a lot of interest for long-term investment themes around sustainability.
Claus Jørgensen: I have been in Luxembourg since 2005, working with many Nordic clients over the years. Denmark and the three other Nordic countries have always been at the forefront of ESG: gender equality, investing in forests and reducing carbon footprints. Swedish fathers do take their parental leave! Sustainability is a cultural asset there. Covid-19 has accelerated the strong need for digitization, transparency and ESG all over the world. VP Bank is in a great position to help clients in this transition.
Dr. Felix Brill: I fully agree. It is also not a surprise that initiatives such as “Fridays for the Future” have their roots in the Nordics.
"ESG should not be the icing on the cake; it must be baked
into the whole company!"
How do you integrate sustainability into your investments?
Dr. Felix Brill: We undertook an extensive stakeholder engagement process. Our goal was to better understand the expectations of all our stakeholders - not just clients. In the end, the main take away was that sustainability should not be simply an “added feature”. It is a matter of credibility. I like to compare it with a cake: ESG should not be the icing; it must be baked into the whole company! So, we are integrating ESG at every level, from research processes up to the portfolio. It is not “either, or”. Everything we offer - funds, discretionary mandates, internal policies - has to meet sustainability requirements. We also developed a sustainability rating, the VP Bank Sustainability Score, for investments which allows us to offer transparency for our clients. The key belief underlying our approach is that it has a positive impact on our portfolio. Our clients do not have to choose between sustainability or performance: they should receive both. From my experience, taking into account ESG criteria improves risk management, which is beneficial for the portfolio in the long term.
Claus Jørgensen: For me and our clients everything needs to be simple and transparent. We are still in a transition period where we are all trying to define what ESG is. The way to get out of this dilemma is to be transparent so that everyone can assess if they understand ESG the same way that we do. Not so long ago, our conversations with clients were about expected returns versus risk. Now we talk about the best way to maintain and improve expected returns but with a better ESG score. Felix makes it easy to understand for everyone.
Dr. Felix Brill: Stocks with a higher Sustainability Score tend to perform better. There are no guarantees going forward but we see that companies managing their ESG risks properly, tend to manage their business properly too. On the other hand, companies neglecting these aspects will increasingly be penalized by markets. In that sense, sustainability can act as a positive catalyst, allowing investors to benefit from new opportunities.
Claus Jørgensen: I like the ‘'Green City Basket” a lot for example. This VP Bank equity certificate allows investors to participate in the trend towards modern, sustainable cities and urban regions. The portfolio selects companies based on four technological and environmentally sustainable trends: modern government, clean utilities, ecologically sustainable infrastructure and urban mobility. More generally, we see a growing number of investors finding this a great way to invest their wealth.
What is your Sustainability Plan 2026?
Dr. Felix Brill: Sustainability is a key pillar of our strategy for the next five years. On the investment side, we have launched “Investing for Change”, an initiative to integrate sustainability criteria into all our investment processes which allows our clients also to discover how they can have an impact. But we have also set ambitious goals beyond the investment offering for 2026. For example, we want to achieve carbon-neutral operations and increase the diversity of our workforce. We are also aiming for an “AA” ESG Rating from MSCI. Change is sometimes difficult to implement, but our whole staff is fully engaged on this journey. I am really happy to be part of that!
Claus Jørgensen: As an example of integration with the local community, we donated 1,130 bottles of fresh juice to the staff of the “Hôpital du Kirchberg” – our neighbor - for their great commitment, while at the same time supporting three young, local entrepreneurs. Another donation was made to “microlux”, the first microfinance institute in Luxembourg. A third supported the FDEF Centre on Sustainable Governance and Markets (CSGM) at the University of Luxembourg. You see we are organizing this interview today using digital technology. Covid-19 has accelerated the use of digital solutions like video conferences. Many organizations now organize virtual meetings and we will reduce our travelling in the future.
Claus Jørgensen and Dr. Felix Brill (VP Bank): Shaping a Sustainable Future