Background: The term Environmental, Social, and Governance (ESG) is a relatively new concept within the financial industry. However, there are a couple of issues connected to the ESG score and sustainable finance. Thus, there is an ongoing conflict between creating economic value, which is the main task for managers, as well as tackling ethical issues such as ESG. Purpose: The purpose of this report is to investigate if there is a correlation between ESG scores and financial performance measures. The measures analysed are, Return on Assets (ROA), Retention Ratio (RET), Operating Cash-Flow (CF) and Debt-Equity (DE), for listed companies in Sweden and the UK. Method: To see if there is a correlation between ESG and financial performance, a Pooled OLS Regression and Fixed Effect Regression Model (FE) was used. The data was collected from the Thomson Reuters datastream, where 75 companies listed on the OMXSLCGI in Sweden and 75 companies listed on the FTSE100 in the UK, was retrieved. Conclusion: The regression results indicated a positive correlation between CF and ESG for both the FE regression and the Pooled OLS for the Swedish middle-ranked companies, as well as a positive correlation between DE and ESG for the lower-ranked Swedish companies. For the UK, no significant variables were found. Because of the limited significant results, this thesis found that there is yet no apparent correlation between the ESG score and financial performance based on the four years analyzed.

The thesis covers the topic of sustainable finance regarding its terminology, policy strategies and overall goals. In addition, it specifically deals with the way sustainable finance is perceived by central banks and other financial market regulators. The first chapter explains terms like "ESG investing," "positive finance," "socially responsible investment, "principles for responsible investing" "or "green finance" and points out the differences between them. The second chapter concerns with sustainable finance policy strategies adopted both by private businesses and public institutions. Mentioned are, among others, the types of ESG screening methods used by investors, the EU Green Taxonomy, the EU Shareholders' Rights Directive and its framework, the European Green New Deal or the concept of a sustainable fiduciary duty principle. It also touches on sustainable, green taxation in the shape of carbon taxes or emission trading schemes. The third chapter explores the objectives sustainable finance try to meet, specifically the ones having to do with climate change. The chapter entails a summary of the potential climate change scenarios as laid out by the Intergovernmental Panel on Climate Change. The fourth chapter deals with the role that central banks can play in sustainable finance as they gradually step...

Background:  A growing momentum around the potential of impact investing to contribute to development in both environmental and social sustainability has challenged the way business is operating, offering solutions for both the people and planet. Previous studies have claimed that trade-offs between purpose and profit are inevitable in order to successfully achieve sustainability goals, which requires practitioners in the financial discipline to invent new investment approaches to manage dual outcomes. Here, it becomes evident to move beyond trade-offs to avoid that one goal outperforms the other, considered as a vital question to address towards a new investment paradigm.  Purpose:  This study aims to explore the nexus between social impact and financial return, and thus understand the different factors that enable managers in the impact investing industry to successfully manage the trade-offs between pursuing dual values.     Method:  An interpretivist approach is followed throughout the study with an exploratory nature that is used to analyze two company cases. In total, two participants were interviewed through qualitative and semi-structured questions; two managers in the impact investing field.   Conclusion:  The findings reveal the interconnection of impact measurement, values and impact management. The authors have derived a model that graphically represents the Impact-Return Nexus Model (IRNM) which enhances the impact awareness and long-term value creation. The result of this study shows how the synergy between social impact and financial return will improve the performance on both sides. Accordingly, the cases present that a nuanced impact-approach tends to scale both impact and profits.

This thesis investigates how ESG ratings for Nordic companies vary between two ESG providers, and how the risk and expected return differs between two highly rated ESG portfolios according to the two providers. In doing so, we aim to contribute to research on the topic of ESG divergence as it is of great importance for investors that this subject is studied further. To achieve the purpose of this thesis, secondary data was gathered in terms of ESG ratings from two chosen providers, S&P Global and Refinitiv. Based on the collected data, a Spearman correlation analysis was performed as well as statistical investigations in Excel in order to examine the rating divergence between the two providers. Additionally, efficient frontier values of the two provider dependent portfolios were calculated using R Studio. The results found suggests that there is an evident ESG rating divergence amongst all companies examined, regardless of origin and industry. Furthermore, it was concluded that Refinitiv consistently rated companies higher than S&P Global. The comparison between the two provider dependent portfolios illustrates that relying on ESG ratings from different providers will result in different portfolio composition. In turn, this has an impact on investors seeking to implement ESG as a part of their investment strategy. The results indicate that the composition differences affects portfolio performance. This led to the conclusion that it is of great importance for investors to be aware of the existing divergence in order to make accurate investment decisions.

I takt med att klimatrelaterade problem blivit allt mer påtagliga har ett flertal internationella samarbeten och handlingsplaner presenterats, däribland Parisavtalet och EU kommissionens handlingsplan för finansiering av hållbar tillväxt. Studier i ämnet har visat att finans- och fastighetsmarknaden utgör en betydande roll i att uppnå den hållbara omställning som eftersträvas i dessa initiativ. För att möjliggöra detta anses gröna obligationer vara ett centralt verktyg i vägen framåt, men produkten bedöms bristfällig och kräver förändringar för att uppnå dess fulla potential.  Gröna obligationer introducerades 2008 och med grund i produktens jämförelsevis korta existens, föreligger en viss oro kring marknadens transparens och legitimitet. Genom att analysera perspektivet hos dagens investerare och undersöka effekten av externa granskningar, syftar denna studie till att identifiera otillräckliga marknadssegment där vidare utveckling kan bidra till att attrahera fler investerare. Denna studie har genomförts med en kvalitativ metod bestående av såväl litteraturstudier som semistrukturerade intervjuer med svenska bolag som investerar i gröna obligationer. Resultaten visade att investerare inte skiljer på avkastningskraven för gröna och konventionella obligationer. Majoriteten av respondenterna ansåg också att marknaden har stor utvecklingspotential där ökad transparens och tydligare definitioner urskilde sig. Genom att studera effekten av externa granskningar har denna studie även identifierat intressekonflikter hos tredjepartsverifierare. Med hjälp av striktare regleringar kan externa verifieringar bidra till ökad legitimitet och således attrahera ett större antal investerare, vilket i förlängningen kan bli avgörande för att uppnå Parisavtalets klimatmål. / As the number of problems regarding climate change has surged, many initiatives have taken place on international level. The Paris Agreement and the European Commission action plan for financing sustainable growth comprise the key endeavors in achieving international climate objectives. Studies have shown that financial and real estate markets will play a significant role in transitioning the world economy towards a sustainable future. In order to do so, green bonds have been identified as a key mechanism, but the product requires substantial development to unlock its full potential. Green bonds are defined, similarly to conventional bonds, as a interest bearing debt instrument, but with the requirement that the use of proceeds contribute to a climate positive project. Because of its recent introduction in 2008, some investors are concerned whether the market is legitimate or not. By analyzing the current investor perspective and examining the effect of external verifications, this study aims to identify insufficient market elements which can be improved and thereby attract more investors. This study has been carried out using a qualitative method consisting of literature studies as well as semi structured interviews with Swedish corporations which invest in the green bond market. The results showed that investors do not differentiate green and conventional bonds regarding yield requirements. The majority also expressed that green bonds have great potential for improvement where increased transparency and distinct definitions stood out. Furthermore, by studying external verifications, this study has identified issues of interest conflict in Third Party Verifiers which improvement is concluded to be pivotal in boosting investor reliance and accessing further investments.

Sustainability has become a pressing global issue due to environmental and social challenges caused by human activity which has led to a rise in sustainable investing, including ESG investing. Research on financial performance and sustainable investing have not only showed mixed results, but they are also generally conducted in greater markets such as the US, Europe, and Asia-pacific markets. Currently, there is a lack of research on performance of sustainable investment strategies in the Nordic Region. The purpose of this paper is to examine the performance of portfolios constructed with an ESG investment strategy, which involves creating two portfolios consisting of top and bottom ESG scored companies. The portfolios are measured against each other and a market index benchmark, in the context of various theories, including the efficient market hypothesis, adaptive market hypothesis, shareholder theory, and stakeholder theory. The theoretical framework includes asset-pricing models and portfolio theory. A quantitative study with a deductive approach is utilized to construct the portfolios, focusing on mid-cap companies in the Nordics with data collected from Refinitiv Eikon’s database. The portfolio construction process yields financial metrics such as returns, volatility, and risk-adjusted returns. To test for outperformance in returns, the unpaired t-test is utilized. The Carhart four-factor model is also used to explain variations in returns related to risk factors and investigate the presence of positive and significant abnormal returns. The results demonstrate that the bottom ESG portfolio exhibits superior portfolio characteristics compared to the top ESG portfolio and the index benchmark, including annual returns and risk-adjusted returns. Furthermore, this study identifies significant positive abnormal returns when using the Carhart four-factor model, and evidence of outperformance in mean cumulative returns for the bottom ESG portfolio relative to the top ESG portfolio and index benchmark. On the other hand, the performance of the top ESG portfolio and index benchmark is inconclusive, with mixed results across different performance metrics and years. Although the top ESG portfolio outperforms in two out of three years in terms of annual returns, volatility, and risk-adjusted returns, no evidence of positive abnormal returns is found. Meanwhile, the index benchmark demonstrates evidence of outperformance in terms of cumulative returns. Overall, the findings suggest that the bottom ESG investment strategy is more effective in generating superior performance, while the mixed results of the top ESG portfolio make it difficult to draw definitive conclusions about its performance characteristics.

The ocean is increasingly seen as a new economic frontier. While investments are rapidly growing, these are mainly directed to unsustainable practices and a huge funding gap remains to ensure that ocean industries are in line with the aspirations of a truly “blue” economy. Acknowledging the role of financial actors as both gatekeepers and enablers of a sustainable ocean economy, this thesis explores the financial landscape of the 100 largest ocean companies – the ‘Ocean 100’ – which collectively account for 60% of total ocean economy revenues. The study uses a mixed-methods approach, combining network analyses, descriptive statistics, and more qualitative examples, to identify financiers of the Ocean 100 and discuss their potential for incentivizing ocean stewardship. It explores two potential leverage points: the use of sustainable loans and bonds and the influence of shareholders. New sustainable debt instruments that link interest rate to sustainability targets are increasingly used by the Ocean 100 and have potential in becoming a new norm, however, the connection to the ocean remains weak. There is a need for transparency and regulation in the sustainable finance market to ensure quality and to scale up sustainable finance instruments. The results also highlight the financial impact of large passive asset managers whose influence span over several ocean industries, some of which are characterized by high market concentration. As interest in the ocean economy is growing, regulations and public pressure to change investment norms represent a much needed incremental, if not radical, change towards improved sustainability.

The purpose of this master’s thesis is to investigate to what extent ESG assets and traditional benchmarks affect one another. Since sustainable investment is a growing segment of the financial market, investors need to be informed about how it may affect their portfolios, and by extension if it can be used for portfolio diversification. By using an AR(1)-GARCH(p,q) model and a Diebold-Yilmaz spillover approach, we can measure the spillover effects between ESG indices and other benchmark indices for both return and volatility. We find that country-level ESG indices are more integrated with other country-level ESG indices than other assets, and that country-level ESG indices transmit more to the MSCI world ESG index, MSCI world equity index, Crude oil, Gold, and our currency index EUR/USD. These findings hold true for both return and volatility spillover. Thus, our policy implications are that including country-level ESG assets in the portfolio can decrease portfolio risk and help minimize the contagious effects of shocks on the portfolio.

With the stakeholder model, the responsibility that companies have in society extends beyond yielding profit to their shareholders. They are also responsible for the environmental and social impact their operations may have, requiring a new type of financing with this kind of commitment in mind. Green bonds are already used extensively in Sweden, especially within the real estate sector regarding green investing and has been well researched. Social investments and social bonds on the other hand, even though there is a growing interest, are not widely applied in the Swedish real estate market. At the same time, the subject remains uncharted by researchers. With a deductive approach using semi-structured interviews with real estate professionals, debt investors, and researchers, this thesis aims to answer why Swedish real estate companies are not using social bonds and what can be done to facilitate its use. The main findings are that social investments and bonds are competing with green bonds, preventing their application. Another hindrance is finding relevant and easily measurable KPIs for social bonds. / Med lanseringen av stakeholdermodellen har synen på företagens roll i samhället förändrats. Modellen menar att företag har ett ansvar för den miljömässiga samt sociala påverkan deras verksamhet har. Med ett sådant ansvar, behövs en ny typ av finansieringsmetod. Gröna obligationer används idag flitigt när det kommer till att göra gröna investeringar i Sverige, framför allt inom fastighetssektorn. Trots ett ökat intresse för sociala investeringar och sociala obligationer bland svenska fastighetsbolag används inte finansieringsformen alls i samma utsträckning som ute i Europa. Även forskningen på området är begränsad. Genom ett deduktivt tillvägagångssätt, med semi-strukturerade intervjuer med verksamma personer inom fastighetsbranschen, skuldinvesterare samt forskare är syftet med uppsatsen att ge svar på vad som begränsar svenska fastighetsbolag från att använda sociala obligationer, samt vad som krävs för att underlätta nyttjandet av finansieringsmodellen i framtiden. De huvudsakliga slutsatserna som dras i rapporten är att det som främst begränsar fastighetsbolagen från att emittera sociala obligationer är konkurrensen från gröna obligationer. Vidare framgår att ett sätt att underlätta användningen av sociala obligationer är att hitta relevanta och mätbara KPIer.

This study investigates the impact of Environmental, Social, and Governance (ESG) ratings on the risk-adjusted returns of fintech firms across different segments, including fintech banks, paytech, wealth tech, fintech infrastructure, and cryptocurrency firms. Using a sample dataset comprising 104 worldwide fintech firms spanning the period from 2012 to 2022, we employ regression analysis to assess the relationship between ESG ratings and stock returns, considering both overall ESG scores and individual pillar ratings. Our findings reveal unique associations between ESG ratings and risk-adjusted returns, varying across different segments of the fintech industry. While high ESG-rated fintech firms exhibit a negative impact on stock returns, low ESG-rated firms show no significant association. Moreover, the environmental pillar rating demonstrates a negative correlation with risk-adjusted returns, whereas social and governance pillar ratings display a positive relationship. Furthermore, infrastructure fintech firms exhibit adistinct pattern, with overall ESG, social and governance ratings positively associated with stock returns. These results highlight the importance of considering ESG factors in evaluating the financial performance of fintech firms, with implications for investors, policymakers and industry practitioners. The study contributes to the existing literature by providing insights into how ESG considerations influence the risk-return profile of fintech firms, offering valuable guidance for sustainable investment strategies in the rapidly evolving fintech landscape.