Drivers of Sustainability in the Swedish Financial Market: A Qualitative Study on the Swedish National Pension Funds

Abstract: Over the past few decades, the world has seen the continuation and rise in the severity of issues facing the long-term wellbeing of people and the environment. To surmount these pressing challenges, society is aiming to change the standard profit-maximizing models of corporations to ones that include considerations for sustainability issues. One of the most powerful players in financial markets that can persuade corporations to enact these sustainable practices are institutional investors due to their high amounts of resources. Specifically, this study takes a closer look into the relationship between one of Sweden's most prominent institutional investors, the AP Funds, and the corporations in which they invest. Ultimately, we determine how the AP Funds influence corporations' sustainability agendas and how the methods of their influence have changed from 2008 to 2021. In this study, we interviewed 10 employees of the AP Funds with roles in the areas of sustainability, management, and equity to gain a better understanding of the strategies and methods that the AP Funds' use to influence corporations. Some of the key components of the interviews were the communication between the AP Funds and their investees via corporate dialogues and the exercising of formal shareholder rights. Through the analysis, we discover that the AP Funds find immense value in corporate dialogues that are informal and in-person, with high levels of availability between the two parties. Over the course of the timeframe, the sustainability dialogues have become more frequent, more efficient and more casual. In terms of the evolution of their methods of influencing, the AP Funds have become more obstinate in their claims as their objectives have converged with those of the public. Finally, we note that through their excellence in corporate dialogues, the AP Funds have acted as institutional entrepreneurs in the Swedish financial market. They are able to actualize their highly valued interests in sustainability by their possession of sufficient resources, including capital, guidance from Parliament and area expertise.