Sustainable Investment Strategies in Practice: Exploring strategy combination to achieve investment objectives

University essay from Lunds universitet/Internationella miljöinstitutet

Abstract: Society faces significant funding gaps as it attempts to address crucial social and environmental challenges. One of the key barriers inhibiting the allocation of private capital to alleviate these funding needs is a lack of established methods regarding how investment practitioners can integrate sustainability considerations into investment processes. This thesis analyses how sustainable investment strategies are combined in practice, with the objective of providing investment practitioners sustainable investment strategy integration guidance. The research applies qualitative content analysis and practitioner interviews to answer the research questions of (RQ1) how strategies are combined and (RQ2) how investment practitioners plan to improve their sustainable investment practices. A case study based approach was chosen since it is effective in examining a complex unit of analysis such as a sustainable investment processes. The analysis revealed that investment practitioners combine multiple complementary sustainable investment practices in the pursuit of primary objectives such as alignment of a portfolio with values/norms, improvement of risk/return profiles, or the maximisation of social/environmental impact. Evidence also emerged that created a strong case to challenge the literature’s existing sustainable investment spectrum conceptual model. The work delivers a new conceptual model that reflects the information gathered and the feedback from investment practitioner interviewees that was used to answer RQ1 and RQ2. The thesis concludes that sustainable investment practitioners do indeed combine multiple strategies to achieve their objectives and a new conceptual model is necessary to account for strategy combination choices throughout the investment process. The conclusions have implications for institutional sustainable investment practitioners who could use the research findings and new conceptual model to guide the integration of sustainable investment strategies into their investment process. Finally, the thesis outlines a number of areas where future research may be beneficial, including the development of best practices for integrating sustainable investment strategies, optimal strategy combinations for different objectives, and measuring the impact of sustainable investment strategies. These future research areas can be helpful in scrutinising the findings from this thesis and supporting its overarching objective of assisting the transition to a more sustainable finance industry.

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