Why Nordic investment is in the vanguard of SRIDecember 2010
Socially responsible investors have long looked to the Scandinavian region as a model. Mike Scott speaks to Ulrika Hasselgren to find out what’s so special about the area’s ethical investment practices
The Nordic region is seen as a leader in SRI, and with good reason, says Ulrika Hasselgren, CEO of Nordic-based Ethix SRI Advisors, which advises institutional investors on developing investment strategies based on SRI principles.
‘A large number and range of investors comply with some kind of SRI criteria,’ she says. A survey by the Swedish Social Investment Forum (Swesif) in 2008 found that almost 70% of all institutional capital in Sweden had some kind of ethical or SRI criteria – a very high proportion.
It was Sweden’s state pension fund AP7 that led the way in this trend, integrating ethical and environmental considerations into its investment strategy in 2000 using a Global Ethical Standard developed by Ethix’s founders. ‘At the time, the market was not very mature,’ Hasselgren says, ‘so there was a big focus on ethical criteria.’
AP7’s policy is founded in the observance of international norms. ‘The fund did not want to be an ethical judge, but to have a values platform that was clear, transparent and everyone could agree on,’ she adds.
Complying with international norms is the platform for identifying companies of concern and potential risks in investment portfolios, as well as highlighting those companies where investors will want to engage with management.
Nordic investors have widely signed up to the Principles for Responsible Investment, and although it currently remains unclear how it will feed through to the investment process, one area where it has had an impact is in engagement. Investors are likely to embrace the possibilities for collaborative engagement that the PRI offers because it is more cost-effective and because engagement has greater weight if more investors are involved.
This norms-based approach is proving particularly useful in emerging markets. ‘This is where a focus on expanded dialogue is more relevant. International norms are very established in the West, but when you look at China for example, you see exceptional potential and capacity but also great challenges in terms of human rights, environment and governance,’ Hasselgren says. International norms are a good basis for engagement because they are almost universal, being based on principles developed by the United Nations and most companies are based in countries belonging to the UN.
However, the motivation behind this large uptake of SRI considerations may be slightly surprising. ‘The media landscape is very important in the Nordics,’ Hasselgren says. ‘They will pick up on important issues and really focus on investors.’ The spotlight has been shone on issues ranging from cluster weapons to child labour and labour conditions in supply chains. This summer, unsurprisingly, there was a strong focus on the oil industry as a result of the BP oil spill and continuing investment in oil sands.
Ethix has recently stepped up its profile by appointing Rory Sullivan as strategic advisor. Sullivan, formerly head of responsible investment at Insight Investment and now holding the same post at Osmosis Investment, is an internationally recognised authority on responsible investment.
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