Sustainable investments are winners in the long run

“In the finance industry there is still a perception that sustainability and ethics have a price in the form of lower return, but increasing numbers of research reports and examples indicate the opposite,” says Anders Thorendal, head of finance in the Church of Sweden. Photo: Magnus Aronson/IKON

The carbon footprint of the Church of Sweden’s Swedish investments in equities proved to be about one third smaller than what would have been the case if a corresponding amount had been invested in the NASDAQ OMX Stockholm index. This is revealed in an annual report published by the national level of the Church of Sweden today. For the first time, the report presents both the financial result and a “climate result”.

“In the finance industry there is still a perception that sustainability and ethics have a price in the form of a lower return – despite the fact that research today indicates the opposite,” says head of finance Anders Thorendal.

Radical changeoverIn recent years the national level of the Church of Sweden has developed asset management that focuses on sustainability issues. Since 2009 the asset management has removed virtually all companies that produce fossil fuels. There are now no coal or oil companies in the equities portfolio, and only small shareholdings in three gas companies.
“The Church of Sweden takes a clear stand in the climate issue, and we also believe that this is sensible in purely financial terms – not least because the majority of the fossil reserves in the ground risk becoming worthless if we are to keep within the two-degree target,” says Anders Thorendal.

Achieving the long-term target The national level of the Church of Sweden has buffer capital of SEK 5.5 billion that is to be managed with consideration to human beings and the environment. The annual report describes the results of asset management in 2013. The result was SEK 610.1 million, corresponding to a return of 12.4%. The report also shows that the asset management in the past decade has achieved the long-term return target set by the Central Board of the Church of Sweden.[1]

This year’s report also presents the “climate result” of the Swedish equities portfolio. The Church of Sweden commissioned an external evaluator to measure the carbon footprint of the portfolio, which proved to be about one third smaller than would have been the case if a corresponding amount had been invested in the NASDAQ OMX Stockholm index.

“We commission the asset managers we use to integrate the climate issue into their investment decisions,” explains Anders Thorendal. “The evaluation gives us an indication of the result. We also use the analyses to identify companies that we should conduct dialogue with to try to convince them to further reduce their climate impact.”
The full report can be downloaded here: http://www.svenskakyrkan.se/responsibleinvestment

Brief facts about asset management at the national level of the Church of Sweden: The Church of Sweden is Sweden’s largest faith community and consists of independent local and regional units (parishes and dioceses) and the national level (the General Synod, the Central Board and the Central Church Office in Uppsala). The national level of the organisation has buffer capital of about SEK 5.5 billion that is managed externally by managers who are evaluated continually on the basis of financial performance and their ability to select companies that are interesting from a sustainability perspective. For example, these may be companies that offer energy-efficient solutions or that actively and systematically work with human rights.
At the same time, the Church of Sweden refrains from investments in weapons and tobacco and companies that mainly produce oil or coal, for example.[2]
In addition, the Church holds annual talks with a selection of companies that need to improve their sustainability work.

Read more about the asset management here: http://www.svenskakyrkan.se/responsibleinvestment

[1] The return target is 3% per year (above inflation) over a rolling ten-year period.

[2] The Church may only consider investing in a company that produces fossil fuels if more than 50% of the production comprises natural gas.

Brief facts about asset management at the national level of the Church of Sweden:

The Church of Sweden is Sweden’s largest faith community and consists of independent local and regional units (parishes and dioceses) and the national level (the General Synod, the Central Board and the Central Church Office in Uppsala). The national level of the organisation manages buffer capital amounting to about SEK 5.5 billion. Read more about the asset management here: http://www.svenskakyrkan.se/responsibleinvestment