“It no longer costly to act responsibly and sustainably on the stock market, Quite the opposite, it is often rewarding,” says Lars Hassel, professor of accounting at the University of Gävle.
Major institutional investors, like the pension funds, make up 90 percent of all the turnover on the financial market, and the factors they base their choices on when selecting companies to invest in play a decisive role.
Professor Lars Hassel has during the last two decades explored the choices of decision makers in major pension funds and their incentives to participate in a sustainable world. During seven years, he was programme director for the programme on sustainable investment research at Mistra, the Swedish Foundation for Strategic Environmental Research.
“Great changes have taken place since I started with this research. It used to be of marginal interest, but now it is mainstream.”
“Today, no investors and institutional investors can avoid to act responsibly,” Lars Hassel explains, “because sustainable companies that take responsibility often have good governance and therefore are less risky investments.
It is no longer costly to act responsibly and sustainably on the stock market. It is often rewarding for owners of companies and, naturally, for society at large: a win-win situation.
“Naturally, it seems sensible to invest for the future when investing pension funds. In such decision-making, not only profits are decisive, but other values are also important,” Lars Hassel says.
Unethical lines of business, like the arms and alcohol industries, are avoided. Nowadays, fossil industries like coal and oil are avoided as well, as they will stagnate in a long-term perspective and therefore pose a higher risk for investors.
“Major investors avoid companies that fail to be responsible, which makes these companies unattractive for both customers and owners.”
Individual companies which break international norms when it comes to environmental responsibility, human rights and corruption are also excluded. Even Swedish companies, like Telia and H&M, have faced difficulties after having been involved in corrupt business deals and child labour.
“In spite of this situation, companies within controversial lines of businesses often stay in business as they tend to state-owned. But, Lars Hassel explains, they are examples of so-called “Border industries,” and here it is often very hard for newcomers to establish themselves. Weapons and alcohol have their limitations.
Apart from the strategy to attempt to avoid or exclude certain lines of businesses and companies, an investment strategy which targets companies that are at the “top of the class” regarding sustainability in their line of business has evolved. Energy companies that can adapt to green energy face a better future, for example.
“One wants to invest in companies with a good strategy and good products that will be sustainable in the future. ‘Top f the class’ has become increasingly important. My research shows that companies with a good reputation and good assessments when it comes to sustainability also have a better market value, that is development on the stock market. Responsibility and sustainability provide that little extra something when it comes to value.”
“The financial market as well as private capital have to be on board if we are to change the economy; the real economy needs a financial market which is sustainable,” Lars says. “To save the environment, tax money will not suffice. Private capital is needed too.”
“The stock market is still very much short-term. It is based on quarters and the reward systems are very short-term and mainly related to financial results. To unite the short-term perspective with a long-term sustainability is still a great challenge and a part of the market economy system,” Lars Hassel states.
An exciting lecture!
Lecturer: Lars Hassel
Date: Friday 20 October
Time: 11.00-13.00 (soup will be served)
Place: Krusentjernasalen, University of Gävle
Welcome to an exciting lecture on how institutional investors can become those who save our planet.
Open to the public. Free admission.
For more information, please contact:
Lars Hassel, professor of accounting at the University of Gävle
Text: Douglas Öhrbom
During 2017, the University of Gävle invites you to a seminar series under the theme of
Economic sustainability from a multidisciplinary perspective. Different perspectives are addressed at seven different lunch seminars, in connection with soup lunch. The seminar series ends with a larger workshop.