Sustainable Investments : Sustainability reporting from the institutionalinvestors point of view

University essay from KTH/Industriell ekonomi och organisation (Inst.); KTH/Industriell ekonomi och organisation (Inst.)

Abstract: This thesis examines the type of Environmental, Social, and Governance (ESG) information that institutional investors seek when making and monitoring investment decisions, as well as the possibilities for this information to be presented in sustainability reports. As a basis, twelve semi-structured interviews were conducted with Swedish state institutional fund holders in the category regions and municipalities. Furthermore, five interviews were conducted with six employees at a large Swedish-Norwegian fund company. The results show that the basic demand for ESG information is governed by the content that the investor's organization's financial policy requires, for example, that the fund company has signed the UN Principles for Responsible Investments (PRI) or follows frameworks such as the Global Reporting Initiative (GRI). Furthermore, sustainability motivations are sought in qualitative form, for example about the fund's sustainability strategy, corporate inclusion and justifications about the fund's actual sustainability impact in the portfolio companies. In addition, motivations for potential future business exclusions is also desired. However, this wish is difficult to cater for as it could potentially create discontent between fund companies and portfolio companies. Such a justification could also contribute to market disorders for the company in question, which could degrade the value of the fund holding. Quantitative data are also requested, such as carbon dioxide emissions for the fund portfolio. However, this cannot always be met in the report as reported data from companies are missing. Furthermore, a necessity for the sustainability reports to be used properly by the investors is that data is presented similarly between funds, so that comparisons between funds are facilitated. Finally, investors point out that much of the ESG information they seek is only useful if all funds report in a similar format, and that the ESG information only becomes truly valuable after a unanimous definition of sustainability is introduced.

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