Each week Emerging Markets ESG publishes an interview entitled, “Five Questions about SRI.” The interview features a practitioner’s insights about SRI in emerging markets and through Emerging Markets ESG shares this expertise with a wide global audience. The goals of Five Questions about SRI are fourfold:
- To reflect on what SRI in emerging markets means to practitioners;
- To collect a catalogue of examples of SRI in practice in emerging markets;
- To raise awareness about SRI in emerging markets; and
- To enable SRI practitioners in emerging markets to network with peers around the world.
This week’s interview is with Arminta Saladžienė, Head of NASDAQ OMX Baltic Market, Chairman of the Supervisory Councils of NASDAQ OMX Tallinn (Estonia) and NASDAQ OMX Riga (Latvia), President and Chair of the Management Board, NASDAQ OMX Vilnius (Lithuania).
NASDAQ OMX Baltic Market is a cross-national Baltic securities market, which is comprised of three regulated markets and three growth markets in Estonia, Latvia and Lithuania, all operated by respective NASDAQ OMX exchanges. The Baltic exchanges share the same trading and information distribution infrastructure as well as common market rules and practices. This enables members of NASDAQ OMX Baltic to freely operate across borders. NASDAQ OMX Baltic exchanges provide listing services for public companies, governments and fund management companies, and conduct electronic trading of equities, corporate and government bonds and investment units.
Arminta Saladžienė currently holds the position of the Vice President of the NASDAQ OMX Group, Head of NASDAQ OMX Baltic Market, responsible for the operations of three stock exchanges and three central securities depositories in Estonia, Latvia and Lithuania. She is one of the initiators and the first Chairman of the Board (2009-2011) of an NGO, the Baltic Institute of Corporate Governance (BICG), established to promote best governance practices in the Baltic region; currently a member of the BICG Council. For her work in the field of corporate governance, she received the Baltic Sea Award 2009 (Baltic Development Forum) and was named the Rising Star of Corporate Governance 2011 by The Millstein Center for Corporate Governance and Performance at the Yale School of Management. In 2010, she was inducted to the Business Hall of Fame by Junior Achievement Lithuania. She is a member of the State Development Council established and chaired by the Prime Minister of Lithuania to develop and implement the country’s long-term strategy “Lithuania 2030.” She is also a member of the Board of the Lithuanian Financial Markets Institute, a member of the Advisory Board of the Baltic Development Forum and a member of the Private Sector Advisory Group of the Global Corporate Governance Forum/ IFC. She hold an Executive MBA from the Baltic Management Institute and a Masters in International Business from the International Business School of the Vilnius University.
Emerging Markets ESG: How would you define socially responsible investment (SRI)?
Arminta Saladžienė: I see SRI as investing based on values: HOW returns are earned matters. Investors who follow SRI philosophy select investment targets based not only on projected financial returns but also consider a broader social and environmental impact. I believe that these value considerations do not have to come at the expense of corporate performance or investment returns. Quite on the contrary, the financial crisis has reminded us that resilience in dealing with shocks and future challenges is key to the sustainability of a corporation. A ticking environmental “bomb,” unfolding social tensions or failures in checks and balances of corporate governance may destroy value overnight. SRI takes these many-sided risk aspects into consideration when constructing investment portfolios and therefore can generate more sustainable and better risk-adjusted returns.
Emerging Markets ESG: What distinguishes SRI from mainstream investment?
Arminta Saladžienė: SRI investors filter investment opportunities through an extra layer of environmental, social and governance criteria. Since these are more difficult to define, quantify and follow, I think a SRI approach requires an investor to dig really deep into the various aspects of a company’s operation and connect separate pieces into a coherent whole. Establishing a close relationship with a company must be quite essential for a SRI investor to gain assurance of a consistent commitment to an environmentally and socially responsible agenda and avoid traps of green-washing and box ticking.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for companies in Lithuania to manage?
Arminta Saladžienė: Because of my keen interest and deep involvement in advancing the corporate governance agenda in the Baltic region I might be biased, but I would highlight the governance dimension. Fair treatment of all shareholders, accountable and independent boards, transparency and open leadership are topical issues among Lithuanian companies at large. Listed companies stand at the forefront, yet there is still much room for improvement, especially in strengthening the boards. A growing number of Lithuanian companies open up their boardrooms to independent directors and look for diversity of backgrounds, genders, competences around the table, yet the scale of change is not satisfactory. We need to see creditors and investors put more pressure on companies to see faster progress, because I believe that incentivizing or discouraging certain behavior using economic levers is way more powerful than imposing more regulation.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for investors in Lithuanian companies to analyze?
Arminta Saladžienė: All listed companies report annually based on a “comply-or-explain” principle how they adhere to the Corporate Governance code. Increasing number of companies are disclosing environmental and social factors of relevance to their industry and business in an annual report, a few publish separate ECG reports. However, the quality of reporting on these aspects and lack of consistent disclosure poses challenges for investors to paint a complete picture.
Emerging Markets ESG: In addition to your leadership role at NASDAQ OMX Baltic, you are also engaged in the Baltic Market Awards and the Baltic Institute of Corporate Governance (BICG). Is SRI on the public agenda in the Baltics and in Lithuania?
Arminta Saladžienė: As sole market operator in the Baltic region, NASDAQ OMX takes the lead in building awareness and promoting best practices among the Baltic companies on these topics. We have a list of ESG criteria included in the Baltic Market Awards, where accountability and transparency of the companies is recognized. Since its inception in 2009, BICG has done a remarkable job in putting corporate governance high on the agenda among the Baltic governments and business, educating over 200 top professionals to serve as independent board members, publishing best practice guidelines and much more. This leadership will no doubt bring visible results to our country and the Baltic region as a whole.