Interest in responsible and sustainable investments continues to grow
Interest in responsible and sustainable investments continues to grow, which we in the Council on Ethics and the AP Funds view as positive. Many believe, rightly, that the field is hot and that the financial market will therefore continue to be in focus even after the UN Paris Climate Change Summit.
For the AP Funds, sustainability issues have been a prioritised area for an extensive period of time. In the preparatory work for the Swedish National Pension Funds Act from 1999, it was noted that “Consideration shall be taken to the environment and ethics in investment activities without compromising the overall objective of high returns”. In hindsight, the timing, insightfulness and simplicity of this intention were excellent. 1999 proved to be the start of several global sustainability projects with a focus on companies and investments.
In the 1990s, sustainability issues had increasingly come up on the agendas of the large companies and in 1999, the UN’s Secretary General at the time Kofi Annan laid the foundation of the Global Compact at the World Economic Forum in Davos. It’s ten principles have since become a standard to follow for the thousands of companies that have become signatories. In 2003, the investors of the world began to rally behind the Carbon Disclosure Project (CDP) to set requirements on the world’s largest listed companies to report on their emissions of greenhouse gases and other information related to how they handle the climate challenge. In 2015, more than 5,500 global companies reported climate data to CDP. This data is important since the AP Funds and several other institutional investors use them both for dialogue as well as to report carbon footprints in their own portfolios. The UN PRI initiative (Principles for Responsible Investment) will celebrate its tenth year in 2016. They have gone from being an initiative backed by some 50 investors to now being backed by nearly 1,400 investors. Since beginning its activities in 2007, the Council on Ethics has worked in the manner recommended by PRI. This way of working has now become very common in the world of investors.
Tough challenges Much has happened with the institutional assets in the past 15 years. There is no doubt that the planet and the global system we have built are facing many tough challenges that can be linked to climate change, democracy issues, resource utilisation, human rights and other issues that can have a major financial impact on the companies. The list can be long. The work being done in the Council on Ethics and the AP Funds is about managing many of these difficult issues and we do so by systematically influencing the companies in a positive direction. So what does the future look like? Institutional investors also have other difficult challenges to handle, such as the low-interest environment, low global growth and large numbers of retirements. At the same time, there are many opportunities bubbling below the surface in the form of less expensive alternative energy solutions from the sun, wind and batteries, as well. Faster flows of information with digital solutions also give people the world over unforeseen opportunities for development. This in turn creates exciting new business models in these areas. The expectations of us institutional investors will probably not diminish in the future, but I am personally somewhat optimistic, not least because the possibilities make the future so exciting! Stockholm,
Council on Ethics’ Secretary General