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Nimeni on Antti Malava ja työskentelen Danske Bankissa vetäen vastuullisen sijoittamisen tutkimusta ja analytiikkaa osana 20 hengen pohjoismaista vastuullisen sijoittamisen tiimiämme. Olen innoissani tullessani valituksi Finsifin hallitukseen vuodelle 2022. Pyrin tuomaan toimintaan lisäarvoa ponnistaen niistä kriittisen, systeemisen tarkastelun oivalluksista, joita työskentely ESG-datan ja analytiikan parissa on minulle opettanut. Pohdin tässä blogissa vastuullista sijoittamista ja avaan ajatuksiani Finsifin hallituksessa työskentelemisestä.

Finsif on toiminut ansiokkaana vastuullisen sijoittamisen suunnannäyttäjänä edistämällä perustietoutta, kartoittamalla markkinatilannetta sekä avaamalla tärkeitä aiheita syvällisemmin. Teemat kuten ilmastonmuutos, luontokato ja oikeudenmukainen siirtymä kestäviin toimintamalleihin pysyvät varmasti keskustelun keskiössä jatkossakin.

Uutena, pysyvänä ja tervetulleena trendinä kartalle on noussut vastuullisuustiedon standardointi ja yhtenevä tiedonanto. EU:n tiedonantovelvoiteasetus SFDR:n tavoitteena on helpottaa sijoittajien työtä sijoitustuotteiden kestävyyteen liittyvien tekijöiden saatavuuden ja vertailtavuuden suhteen. Asetus velvoittaa finanssimarkkinoilla toimivat yritykset kertomaan sijoittajille kestävyyteen liittyviä tietoja yhteismitallisin kriteerein. Sääntely astuu voimaan portaittain, alkaen maaliskuusta 2021 velvoittaen toimijat mm. julkaisemaan verkkosivuillaan kestävyysriskien huomioonottamiseen liittyvät toimintaperiaatteet sekä tiedot sijoituspäätöksistä johtuvien pääasiallisten haitallisten kestävyysvaikutusten huomioimisesta.

Termit kuten kestävyysriski, haitallinen vaikutus kestävyystekijöihin, ympäristöön tai yhteiskuntaan liittyvien ominaisuuksien edistäminen ja kestävä sijoitus ovat keskeisiä tiedonantoasetuksessa. Aiemmin termien määrittelyjen ja mittaustapojen vakiintumattomuus ovat osaltaan vaikeuttaneet sijoittajien mahdollisuutta vertailla rahastojen vastuullisuutta ja kestävyyttä ja tehdä niiden osalta valveutuneita sijoituspäätöksiä. Mutta vaikka terminologiaa ja mittareita nyt standardoidaan, tullee saatavilla olevien tietojen yhdenmukaistuminen kestämään aikansa sitä mukaa kun yritykset ryhtyvät niitä raportoimaan ja palveluntarjoajat keräämään ja analysoimaan. Samoin asteittain laajeneva tiedonanto voi näyttäytyä sijoittajalle informaatiotulvana – irrallisina mittareina ilman kontekstia, vaikeuttaen kokonaisuuden ymmärtämistä ja tiedon hyödyntämistä sijoituspäätöksissä. Onkin tärkeää valistaa sijoittajia sääntelystä, terminologiasta sekä raportoinnin ja datan kehityksestä jatkuvasti ja ennen kaikkea selkokielisesti, helpottaen heidän työtään vastaanottaa, sulattaa ja hyödyntää saatavilla olevaa informaatiota.

Vanha viisaus ”tieto lisää tuskaa” on siis relevantti huomio myös vastuullistiedon osalta. Sen takana on kokemus siitä, että tieto tuo mukanaan valtaa ja ennen kaikkea vastuun siitä, mihin ja miten tietoa käyttää. Sijoittajan pitää pystyä asettamaan tieto oikeaan kontekstiin. Työskentelyni ESG-datan parissa on opettanut, että on erittäin tärkeää pyrkiä ymmärtämään tietoa, sen lähdettä, mittaustapaa ja määritelmää, sekä omia sijoitustavoitteita näitä vasten, eikä vain käyttää tietoa sellaisenaan. Jos yritämme – toista vanhaa sanontaa mukaillen – opetella juoksemaan ennen kuin opimme kävelemään, mm. viherpesun riski sijoitustuotteita markkinoidessa kasvaa. Finsif voi osaltaan selkeyttää sijoittajien tiekarttaa informoimalla tiedonantovelvoitteen asteittaisesta voimaantulosta ja syistä mahdollisille viivästyksille, kartoittamalla markkinatilannetta Suomessa, havainnollistamalla terminologiaa sekä nostamalla faktojen kautta esiin dilemmoja, jotka kaipaavat selkeyttävää kriittistä keskustelua. Odotan innolla alkanutta vuotta ja kannustan kaikkia olemaan aktiivisia osallistumaan keskusteluun omin näkökulmin!

Aurinkoisin terveisin,
Antti Malava,
Head of Sustainability Insights & Analytics, Responsible Investment, Danske Bank
antti.malava@danskebank.fi

Regulations, policies, reporting, data and guess what- investor´s values are making the difference
EU regulation/taxonomy on sustainable finance, that is put into action regarding climate change mitigation in the beginning of 2022, will have an impact on the responsible investment strategies, plans and actions in the finance sector.

Not only is EU regulation affecting Nordic investors. Globally in 50 largest economies, there are more than 730 policy revisions and +500 existing policy instruments connected to sustainable finance. In addition, reporting is requiring more resources from investors, and on the other hand reporting will bring more transparency into practice. Next to policies, regulations and reporting, large quantity, and quality of ESG data is setting opportunities and challenges in balancing analysis from the responsible investing point of view. The market for ESG data has grown to over 1-billion-dollar business – the information is out there just to be turned from quantity to quality.

The demand and supply for e.g., green bonds, sustainability bonds and ESG funds, are growing rapidly. Alongside with institutional investors, individuals have become more interested in balancing their own values, visions and expectations, and they weigh these factors when investing their money. Investing has even become a part of building one´s personal brand. Next to pure profit-making, ESG factors or the will to invest in solutions or products that are parallel to the goals of sustainable development or one´s ethical believes, are playing even bigger role in investment decision making.

According to a survey covering over 5 000 responds by private investors in Finland, (conducted by Emilia Vähämää and Hanna Silvola Hanken School of Economics, and Professor Bonnie Buchanan, University of Surrey, UK, 2021), millennials are more interested in responsible investing. Moreover, according to the survey, over 60 % of the total number of respondents include ESG factors into analysis. In addition, the survey reveals that from the bucket of ESG themes, investors are focusing on environmental aspects whereas taxation or enhancing diversity of employees were not the key focus areas in decision making process.

How we tackle the ESG jungle?
Based on Finsif´s strategy, a survey taken of the membership, and the vision of the active board working daily with responsible investing scheme, few themes were brought up to be focused on in Finland in 2022: biodiversity, electrification, EU taxonomy/sustainable finance, climate change and net-zero, ESG data and measuring ESG performance. Other current topics drawn interest in Finland are e.g., sustainable food procurement- its role and possibilities, ESG questions linked to alternative investments and government bonds. According to the survey taken of the membership, people would like to participate live meetings instead of online events, and concreate workshops on sustainable investing are requested. Finsif uses hybrid- model in event production if possible, and hands-on workshops are going to be on the agenda -online or live.

More practical tools and clarity for noting the perspectives of sustainable investing are needed. Finsif tackles the challenge by translating its 2021 revised Responsible Investment Guide to English by summer 2022, for helping individuals, institutional investors, asset managers, universities and universities of applied sciences, NGOS and others interested in the topic, to navigate through essentials of ESG and responsible investing.

Nordic knowledge on responsible investing, will be playing increasingly important part of Finsif´s work. Nordic countries have increased the exchange of information on responsible investing during last couple of years and this collaboration is called NordicSIF. The next NordicSIF meeting is held in June 2022 in Reykjavik and is open to all SIF members (Including Finsif members). The NordicSIF collaboration includes for example joint meetings yearly, regular conference calls, inviting other SIF´s members (Denmark, Iceland, Norway and Sweden) to join local events online, assembling newsletters on the current topics and work. In addition to Nordic collaboration, Finsif is a part of The European Sustainable Investment Forum (Eurosif) under an observer status. Being a part of European sustainable investment information flow and networking, Finsif has an opportunity to serve its members by bringing insight to both Finnish and Nordic connections on sustainable investing.

There are lots of fascinating dimensions to be discovered under the theme responsible investing this year.

Have fun, get inspired and most of all, warmest welcome to join our flow to make things better.

Happy and safe year 2022!

Leila Räsänen, Finsif
Coordinator
info@finsif

Finland’s Sustainable Investment Forum (Finsif) is a member based organization, that promotes responsible investment that takes account factors related to environment, society, and corporate governance when considering investment decisions. Finsif was established in 2010 and it has over 80 member organizations. www.finsif.fi

The role of the Finnish state as an owner of business corporations, and as a shareholder of publicly listed companies, keeps surfacing in public discussion and media. Conflicting interests of politicians and other shareholders are typically, and rightfully, cited as the primary issue. The latest major news topic in this area was when the remaining 6.3% stake of Finnish sovereign wealth fund Solidium in steel company SSAB was transferred to direct ownership of the Prime Minister’s Office. When maneuvers such as this take place, the minister of ownership steering tends to get media coverage, and the opposition, naturally, reminds of underlying dubious motives, the role of the state, or whatever suits the purpose.

Politicians’ ESG programmes

Over the last decade or so, states have increased their partial ownership in publicly listed companies through sovereign wealth funds both domestically and abroad. In my master’s thesis, I explore how this hybrid model of global state ownership behaves with relation to corporate social responsibility, inspired among other things by the Finnish state’s undertakings in the stock market.

Deriving from agency theory, I hypothesized that the accountability of the government towards citizens could be a major factor in that relationship, or more precisely, accountability of politicians towards potential voters. I wanted to see if there is a relationship, if the relationship includes a causal dimension, and if democratic and autocratic regimes differ in their actions as a part-owner.

Findings of the thesis

Using a sample of above 50 000 firm-year observations of Refinitiv ESG scores in 69 countries during 2002-2019, I found the relationship to be quite clear: state-owned enterprises tend to have substantially higher environmental and social responsibility scores, but a milder premium in governance. The positive relationship is clearly stronger in democratic countries. Importantly, when accounting for selection of state-owned companies based on size, industry, and other variables, the relationship only remains positive and statistically significant in environmental and social responsibility of state ownership by democratic countries. In those relationships too, the responsibility premium drops to about half compared to without selection. The pattern is quite similar when I categorize countries based either on the government’s (environmental policy) or citizens’ (World Values Survey results) stated interests.

The finding that democratic country state ownership is centered on environmentally and socially responsible firms is robust. This statement has been shown using several tests with different data and specifications. I have also used several methods to delve into both causality and the role of other institutional factors, such as minority investor protection. Whether states actively affect responsibility of partly-owned companies remains blurry based on my results.

Arttu Pyysing, Department of Finance, Aalto University, Graduate 2021

Linkki Pro Gradu- tutkielmaan

Today, ESG investing is quickly rising in popularity among investors. During these times, when climate change is a hot topic worldwide and green investment products are blooming, it almost seems like there is not an investor who would not like to participate in ESG investing. However, while institutional investors have noticed the opportunity and are now focusing on developing more ESG investment products, direct investment transactions have not moved towards ESG integration as rapidly. May this be because ESG investment products have been marketed well but the true benefits of ESG integration to one’s investment policy are not yet well-known to private equity investors?

ESG integration and ESG due diligence have various benefits from an investor’s perspective
A truly important benefit of ESG investing is the possibility to gain higher investment return, at least when viewed from a longer investment horizon. In addition, investors have other drivers to integrate ESG strategies to their investment processes. Inter alia, ESG integration can also help in overall cost savings, improve investors’ reputation among their stakeholders, give competitive advantages in the future, create new business opportunities and also give investors opportunities to invest according to their own values. Moreover, during the worldwide pandemic situation, sustainable investing has been shown to be the key to better crisis performance and recovery.

In my research “ESG Due Diligence in a Share Purchase Transaction from an Investor’s Perspective”, I studied the main benefits and drives for investors to conduct ESG due diligence in M&A transactions, namely focusing on share purchase transactions. In the course of the study, I found various benefits that can be associated with performing ESG due diligence in M&A transactions. ESG due diligence can even be considered crucial in the first phase of an investment process, when the investor wishes to make sure that its investment target is suitable considering the investor’s ESG strategy and to make sure that the investment is viable.

More precisely, important reasons for an investor to perform ESG due diligence review are to find out the actual target value and to ex-ante discover and mitigate potential ESG risks following from the transaction, i.e. to know whether to move forward with the transaction. When aiming to reach the sustainability goals, ESG due diligence can be used to assess how the target creates its value and whether this value creation is sustainable. The risks that the investors wish to mitigate with ESG due diligence include compliance risks, operational environment risks as well as reputation risks.

Overcoming obstacles related to ESG integration and ESG due diligence
Undeniably, performing ESG due diligence may have downsides in some cases due to which some M&A investors may still be afraid to include ESG reviews in their investment processes. However, as found in my study, most of the obstacles that can be associated with general ESG integration and ESG due diligence, can be defeated when letting go of the short-termism paradox which still seems to be prevalent today. This means that private equity investors have little to be afraid of and there is still an excellent opportunity to take part in the “doing well by doing good”. Further, performing ESG due diligence is a great practical way to take action and to get the most of ESG investing in M&A transactions.

Getter Villmann, Faculty of Law, University of Helsinki, Graduate 2021

Phasing out coal is one of the most immediate steps that we need to take if we want to avoid a global climate disaster. By ending the use of coal and by transitioning into cleaner energy sources, we can cut 33% of the global emissions. This would bring us a step closer to achieving a 1.5-degree Celsius temperature rise.

In my research, Value Relevance and Impact of Sustainability Measures in the Coal Industry, I examined the value relevance of sustainability measures in the coal industry, in theory, how do investors appreciate environmental efforts coal companies conduct, and how do they value the coal expansion plans of these companies. The backbone of my research was Urgewald’s Global Coal Exit List (GCEL), which is an excellent tool for investors and asset managers to manage, and act on their own coal exposure.

The research showed that investors penalize the environmental efforts the companies conduct, which is a worrying result as the industry should see the environmental efforts the companies conduct as a value adding matter, and reward companies that are taking the right steps to phase out of coal. I studied the relationship between ESG performance and company value (Price-to-book ratio and Tobin’s Q), and when examining individually the respective ESG pillar scores, the largest value decrease was found from the environmental pillar. This further highlights the fact that environmental efforts are penalized in the coal industry.

The research also showed that investors penalize future expansion plans of the coal companies, which is a good sign, as it means that they see the future coal plants as a negative thing for the company value. Nevertheless, the world’s coal producers are currently planning as many as 432 new mine projects with 2.28 billion tonnes of annual output capacity. This is intolerable, and this is where investors step in – this can be stopped, and it should be stopped.

Often in sustainable finance the focus is on the companies that are doing good, for example measured by an ESG Score. What is needed, is to face the ugly truth, the largest emitters of our planet, and change those. In some cases, divesting from these companies is not enough, active ownership and an ‘activist approach’ is needed to change this industry, because at the end of the day, investors can have a huge impact on how economies change, and the financial industry can drive this transition quicker than policy makers can.

Antti Hämmäinen, Finance Department, Aalto University, Graduate 2021,
Cooler Future, Impact & Investments

👋 Would you like an update on the latest #SustainableFinance developments at the EU level 

📅 When ❓ Thursday 7th of October – 15:00 CET

👀 For who ❓ Exclusively for SIF members

👉 Register here: https://bit.ly/3i14up9

📢Save the date 📅

The Eurosif #SRIStudy 2021 launch event is coming 🌱

When❓ 27^th September 2021

How❓ Online

Registration will open 🔜 Stay tuned!

Climate Finance Week Ireland 11. – 15.10.

www.sustainablefinance.ie

Register for Climate Finance Week Ireland Events here

CFA Society Finland Event 11.10.2021 Regulatory Expectations and Impact of the EU Sustainable Finance Strategy -webinar: Ilmoittaudu tästä