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Assessing Sustainability in Nordic Companies

This summer, as well as in previous summers, a team of graduate students is based in the offices of the Swedish House of Finance. They are working diligently throughout the summer, under the guidance of Stockholm-based company Resility, to research all large- and mid-cap publicly traded Nordic companies and rank their sustainability efforts.

 

The students, handpicked from a pool of applicants from the Stockholm School of Economics, KTH Royal Institute of Technology, and Lund University take part in Resility’s internship program. During the internship, the students review annual reports, sustainability reports, websites, and other publicly available information to determine sustainable performance. They collect specific data points on each company, apply Resility’s proprietary methodology to those findings, and rank the companies according to their sustainability performance. The rankings are published on the website nordicranking.com. Resility and the Swedish House of Finance collaborate on the use of ESG data for the purposes of academic research. This collaboration means there will be an increased significant impact on thought leadership in sustainability and finance. Daniel Karlén is Executive Director and Partner at Resility.

 

– We could think of no better place to hold our summer internship. The location allows our interns to interact with finance academics and professionals. And given the cutting-edge work we are performing, being at the Swedish House of Finance allows us to collaborate with leading finance researchers. Our research and data has been, and continues to be, incorporated into the latest research efforts conducted by academics at SHoF, and in the broader global academic community as well, says Daniel Karlén.

 

The Resility team’s research efforts are currently part of a Swedish House of Finance research project called “ESG Knowledge, Investments and the Allocation of Talent”, led by Anders Anderson, Director of SHoF and funded by Vinnova. By employing Resility’s ESG data together with other data sets, the project aims to establish connections between individual’s decision-making and companies ESG activities. As such, the research strives to show the impact of companies ESG activities for individual financial decision-making. Co-locating has allowed collaborations like this to take place.

 

ESG-data provides an opportunity for investors to stand out

 

Resility, through its ongoing dialogues with corporations and the investment community, has noted a strong interest in incorporating ESG into the investment decision-making process. But the practical application of that has proven to be a significant challenge for investors. Most investors have found it difficult to access and utilize appropriate information to convincingly meet their commitments. Part of it has historically been lack of standardized and comparable ESG information on companies, a gap that Resility is filling. The remaining piece is to put the information to mainstream use by portfolio managers and equity research analysts. Daniel Karlén and his colleagues believe that the increasingly hard to achieve better-than-market-performance is a driver for change and an opportunity for investors to stand out by seeking an analytical value driven integration throughout their business based on relevant ESG data.

 

– However, in some respects, Sweden and The Nordics more broadly are ahead of the game. Disclosure of information, while not standardized in its’ reporting, is at least robust. In other parts of the world, for example in the United States, disclosure may not be as strong, but more ESG investment opportunities are available because it is a larger market with more varied investment opportunities, including those focused on ESG. Also, the business community in the Nordics tends to be less eager to invest in new products, including ESG investment products. Other markets tend to be more open to new products, says Daniel Karlén.

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