The Swedish approach to SRI

Sweden’s historical approach to socially responsible investments in asset management is set to undergo a change, according to industry experts.

From a position of exclusion and negative screening, the industry is set to continue moving towards positive screening, dialogue and broader application of UN Principles for Responsible Investment (UNPRI), as SRI becomes increasingly thought of as adding layers of understanding about environmental, social and governance matters to mainstream investing and investment products.

This change will occur elsewhere in Europe too, but Nordic markets such as Sweden look set to start the trend, largely because of the existing importance of SRI in the local investment and pension fund markets.

For example, data for 393 Sweden- domiciled funds shows that 15 have the words ‘ethical’ or ‘SRI’ in the title. Seven of these have a positive three-year performance record led by Swedbank Robur’s KPA Etisk Blandfond 1, which returned 26.44% over three years to 14 February.

The area of pensions is heavily motivated by ethical and SRI considerations, according to informa- tion from the Swedish Pensions Agency. Its tables show that 94 of 797 funds are identified as primarily being ‘ethical’ or ‘environmental’ funds. That is a 12% ratio of funds that apply either a tough exclusion policy or, as is increasingly the case, are active in pursuing company management on their policies.

One of the performers noted by the Agency’s filtering for ethical or environmental funds over the past 12 months is the Carlson Sweden Micro Cap, which invests exclusively in equities of Swedish companies with a maximum market capitalisation value of Sek10bn (€1.13bn).

Highly rated

Per Colleen, the fund’s manager, pushed returns to 40% for 2010 by investing in green tech, among other areas. Carlson is the asset manager of DnB Nor. Colleen was rated in January by Morningstar and business daily Dagens Industri as one of the two best fund managers in Sweden.

As the figures suggest, these funds are spread across the risk spectrum: some very high risk, others low. Asset allocation within the SRI concept is as important as for any type of portfolio building, the Agency’s figures seem to suggest. The data for 2008 throws up the Sarasin Investment Sustainable Bond fund as being among the best performers on a single discrete-year basis. However, this is not necessarily the case over a longer period.

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