During recent years many fund managers have merchandised their funds as accounting for “ethical”, “responsible” and “sustainable” criterions during the investment process (the generic term “ESG funds” will be used hereafter). These managers have used this as a marketing tool and claimed that this brings added value to their investors.  However, it has been very hard for investors to actually determine if the fund managers have been following these announced “ESG” criterions and strategies. In addition to this there have been a lot of discussions around whether or not funds that incorporate “ESG” criterions during their investment process sacrifice return in order to fulfill their obligations.   During March this year Morningstar launched the first independent rating that aims to evaluate how the underlying holdings in fund, i.e. companies in which the fund own shares, manage environmental, social and governance (ESG) matters. By analyzing the underlying holdings from the aspects mentioned above, Morningstar has been able to aggregate this information into a sustainability measure for funds. This new sustainability measure has been named Morningstar Sustainability Rating™, which is a rating for how sustainable a fund is.   This thesis address questions regarding how ESG funds, or rather funds that market themselves as ESG funds, tend to have different attributes compared to traditional funds in the Nordic countries Sweden, Denmark, Finland and Norway. The specific attributes that has been examined are relative fund flows, total returns, risk-adjusted ratings and sustainability ratings.   The results suggest that ESG funds do not show a difference in Sustainability Ratings compared to traditional funds. Furthermore, it could be verified that ESG funds in some cases generate higher relative fund flows compared to traditional funds. It has also been confirmed that these ESG funds actually outperforms traditional funds from a total return perspective.

The last decades have seen a rapid increase of sustainable investing, also known as ESG (Environmental, Social and Governance) investing. There has also been an increasing body of academic literature devoted to whether investors can gain any financial benefits from taking ESG under consideration. Previous literature of portfolio performance in terms of risk-adjusted returns has given much of its attention to best-in-class approaches, which is a strategy that selects top performers in ESG within a sector or industry. The purpose of this study is foremost to investigate a best-effort approach to ESG investing, which is a strategy that focuses on the top improvers in ESG. The purpose is further to compare this with a best-in-class approach, since the findings from earlier studies of this strategy still are inconsistent. The region chosen to perform this study in is the Eurozone. Several theories that have implications for portfolio studies and abnormal returns are taken under consideration in relation to the study and its findings. This includes the efficient market hypothesis, the adaptive market hypothesis and modern portfolio theory. The theoretical framework also cover asset-pricing models and the notions of risk-adjusted returns. A quantitative study with a deductive approach are used to form portfolios, with a Eurozone index as the investable universe. Best-effort and best-in-class portfolios as well as difference portfolios of the two approaches are created, based on ESG data and different cut-off rates for portfolio inclusion. As for risk-adjusted performance measure, the Carhart four-factor model are used. The overall results are mostly insignificant findings in terms of abnormal returns. However, three best-effort portfolios based on the top ESG improvers show significant positive abnormal returns. These findings are strongest for the environmental and social factor. As for the best-in-class approach, only the governance portfolios provided weakly significant results in terms of abnormal returns. Further, the study is not able to significantly distinguish between a best-effort and a best-in-class approach when it comes to risk-adjusted performance. The exception is the environmental factor based on the top performers in each approach, where the best-effort portfolio outperforms the best-in-class portfolio. Finally, none of the portfolios provided significant negative risk-adjusted returns. This can at least be considered as good news for ESG investing, since it indicates that investors do not have to sacrifice risk-adjusted returns in order to invest in a more sustainable way.

Large institutional actors in the financial arena are moving their capital in a sustainable direction. This implies a change of the institutional norms and rules regarding sustainable investing. One of the problematic aspects of sustainable investing is how investors use different strategies to influence their holdings and what implications this choice might have on a sector level. The purpose of this paper is to empirically examine how the strategies from institutional investors are an expression of the current norms and rules in the field of sustainable investing. It also intends to illustrate how institutional pressures influence the strategies of investors and their holdings. By interviewing respondents from eleven institutional investors, we present data regarding norms and rules for sustainable investing and the consequences of the investor’s strategies. Our findings indicate there has been an immense increase in demand for sustainable products in recent years, resulting in institutional pressures that have influenced both the investors and their holdings. This exposes the field to selection processes which may force organizations to the point of adapt or die. Finally, our conclusion provides practical implications on what role institutional investors have in the quest for sustainable development.

Traditional investing is mainly concerned with creating a financial return on investment for the investor and hence disregards other non-financial issues such as adverse environmental and societal impacts. This negligence of negative impacts in the investment process is beginning to be addressed with the emergence of environmental, social, and governance (ESG) investing, socially responsible investing (SRI), and other sustainable investing types. Therefore, this thesis aims to establish if and how large Nordic institutional asset owners integrate sustainability and ESG concerns into their respective investment processes. Moreover, a secondary goal is to determine what type of investing the current investment processes of the seasset owners resembles most. The thesis utilizes a qualitative methodology in order to gather the necessary data-points. All the information in this thesis comes from publicly available sources such as annual reports and sustainability reports. The study found that the asset owners analyzed utilize ESG integration in their investment processes. The asset owners have specific guidelines that pertain to ESG issues, and screen for non-compliance to ensure that investments with potentially detrimental effects on society are excluded from their respective portfolios. Aminority of the asset owners also utilizes best-in-class screening to identify investments with the strongest ESG performance. Hence, the asset owners, in general, are located between SRI and ESG investing on the motivation spectrum.

This thesis aims to examine the relationship between ESG (Environmental, Social and Governance) ratings and the performance of European stocks. The purpose of this study is to examine the existing evidence pertaining to this relationship and the contradictory results that have been offered by previous scholars. The sample used includes ESG and stock return data from Refinitiv for the years 2010 to 2021 on the European market (Austria, Belgium, Denmark, Finland, Germany, Greece, Iceland, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom). An ESG portfolio approach is used as the econometric framework, where performance evaluation models such as the CAPM model developed by Sharpe (1964), Lintner (1965), and Mossin (1966), Fama- and French (1992) 3-factor and Carhart (1997) 4-factor models are applied. The results obtained from this study could not show any significant alphas to prove a relationship between ESG ratings and stock performance. Thus, no abnormal returns should be expected by investors that use an active investment strategy based on ESG screening.

I och med ökad takt av klimatförändringar, global fattigdom och stigande havsnivåer har intresset och vikten av att investera hållbart ökat markant den senaste tiden, både för de stora och små investerarna. Den snabba tillväxten av hållbara investeringar har lett till problem som falsk marknadsföring, greenwashing, olika typer av miljö- och ESG-hets samt uppenbarat en avsaknad av standardiserade regelverk för sådana typer av investeringar. Detta är ett problem som privata investerare, stora investerare och andra investeringsorganisationer och institut uppmärksammar världen över. Den tidigare forskning tyder på att, trots att det finns verktyg som främjar hållbara bolag och kriterier för att sålla bort ohållbara bolag, verktygen varierar i kvalitet och omfattning. Det är därför svårt att säkerställa att hållbara investeringarna är genomgående hållbara. Forskningen tyder även på att Impact Investing aktörerna är för outforskade och att det krävs forskning som kartlägger hur aktörerna arbetar idag med kriterier och processen, och om de stämmer överens med definitioner av begreppet som tydligt avskiljer dem från andra hållbara investeringar såsom ESG-fonder. Syftet med studien var att undersöka investeringsprocessen och hållbarhetskriterierna som Impact investerare samt ESG-fondförvaltare implementerar för deras investeringar. Detta undersöktes genom intervjuer med aktörer från både investeringsgrupperna på den svenska marknaden. Detta för att kunna klargöra hur Impact Investing utvecklar hållbara investeringar. Det vi kan konstatera är att de till stor del använder likande processer men på olika sätt och med olika reglering. Impact investerarna lämnar inget utrymme för negativ hållbarhetspåverkan och vidtar resursintensiva processer för att säkerställa mätbarheten och den positiva påverkan på hållbarhet för varje investeringarna. Studiens resultat visar på att Impact investerarnas processer och kriterier är klart mer omfattande, och ställer högre krav på mätbarhet samt påvisad hållbarhetspåverkan, än ESG-fondförvaltarnas processer och kriterier.  Däremot saknar Impact Investing i dagsläget mycket av den övergripande regleringen och möjliggörande system för att kunna styra om det stora kapitalet inom finansvärlden. Det finns ett behov av ytterligare reglering samt systemutveckling för Impact Investings fortsatta tillväxt och legitimitet som en investeringsmetod som kan redovisa mätbar positiv påverkan på hållbarhet. Resultaten visar på att det finns ett behov av båda investeringsformer, och att de uppfyller olika funktion, därmed är det även viktigt att tydligt urskilja investeringsformerna för att minska tidigare nämnda greenwashing, något som vi gjort i denna studie. Bland annat visar studiens resultat på att ESG-fonder är mer lättillgängliga för privatinvesterare än Impact Investing, åtminstone för majoriteten av de investerare denna studie undersökt. Men även att ESG-fonderna i denna studie fungerar mer som en traditionell fond som följer vissa hållbarhetskriterier, medan Impact investerarna i denna studie är mer nischad och riktar sig till en specifik typ av bolag som kan generera mätbar positiv påverkan på prioriterade samhällsproblem.  Slutligen kan vi konstatera att studiens resultat tyder på att de Impact investerare som undersökts arbetar med Impact Investing på ett sätt som tydligt utvecklar hållbara investeringar mot att likna finansiell redovisning. Investeringar utifrån Impact Investing börjar likna finansiell redovisning i att de blir alltmer mätbara, och avkastning vad gäller hållbarhet mäts även i större utsträckning. Denna utveckling sker genom processer som enskilda aktörer antar, men även regleringar och ramverk som olika organisationer ämnar införa som standard.

We are currently in the golden age of sustainable investing much thanks to the increasedimportance of companies acting responsibly and sustainably. ESG reporting practices aredrastically improving globally. However, emerging market equities remain remarkablyunderrepresented compared to developed market equities in institutional investors’sustainability portfolios. One of the most popular sustainable investing practices is ESG investing. Over the years, institutional investors have developed several ESG investingstrategies. A relatively new and upcoming strategy which is expected to growtremendously over the coming years is thematic ESG investing which differentiates itselfcompared to more traditional strategies. To the author’s knowledge, very few studies havebeen conducted comparing the performance of ESG investment strategies against eachother, especially comparing thematic ESG versus more traditional ESG investingstrategies in emerging markets. This study found that emerging market based thematic ESG portfolios built around thetheme of clean energy perform better financially compared to more traditional emergingmarket-based non-thematic ESG portfolios. Hence, answering our stated researchquestion “How do Clean Energy focused thematic ESG investment portfolios performcompared to non-thematic ESG portfolios in emerging markets?”. Thematic clean energyportfolios rebalanced annually and quarterly performed better in almost every aspect(return, risk and risk/return) compared to broader non-thematic ESG portfolios during ourselected 5-year period, indicating that thematic investing may be the better strategy toadopt if investing sustainably in emerging markets. This study also found evidenceindicating that emerging market-based thematic clean energy portfolios may performbetter than their developed market counterpart. These findings should persuade investorsto finally break the norm and allocate more capital towards emerging market equities,unlocking the potential for previously hidden diversification opportunities. By analyzingthe performance differences through the lens of existing financial theories, this studymanages to also break new ground within the field of sustainable investing literatureadding new valuable insights while also challenging already existing financial theoriessuch as the efficient market hypothesis. This is a quantitative comparative study utilizing a deductive approach, where the authorshave created and compared the performance of sustainable equity portfolios in emergingmarkets. The Carhart four-factor model was applied through OLS regression to explainthe excess returns of the portfolios, Monte Carlo simulations were conducted to predictfuture movements of the portfolios while multiple performance metrics such as Sharpe,Sortino, and Treynor were calculated and compared.

This paper analyzes the difference in yield to maturity between two types of ESG-fixed income instruments, and aims to answer the research question "Is there a yield difference between sustainable-linked bonds and green bonds issued in Europe?". The sample consists of a total of 1499 bonds, issued between the time period 2019-2023, where the databases Bloomberg and Refinitive Eikon have been used to collect and filter the data. The null hypothesis is that there is no significant difference between the two bond types, the alternative hypothesis states that one of them has a premium towards the other. For the methodology, the sustainability-linked bonds (SLBs) are matched with green bonds, creating pairs based on similar characteristics. This procedure, which corresponds to previous work by Kölbel & Lambillon (2022), alongside an OLS regression, are used to answer the research question. The results show that there is no significant yield difference between the bond types. This conclusion is drawn from using a Wilcoxon test on the paired bond sample. The result from the regression implies that the yield on green bonds is explained by the defined independent variables to a greater extent than the yield on SLBs. There are amble number of prior studies which have found a present premium on the ESG instruments green bonds (Fatica et al., 2019; Baker et al., 2018; MacAskill et al. 2021; Kapraun, 2021; Löffler et al., 2021; and Zerbib, 2018) and SLBs (Kölbel & Lambillon, 2022; Feldhütter et al., 2023). This essay aspires to use previous research findings as reference for comparing bond types against each other rather than their performance against conventional bonds. Additionally, the SLB instrument is still considered relatively novel and hence this essay aims to contribute to existing knowledge with new inputs and findings.

Approximately $25.2 trillion in total assets under management in the United States is involved in some strategy of socially responsible and sustainable investing. Grounded in the stakeholder theory, the purpose of this correlational study was to examine the relationships between financial performance, firm size, leverage, and corporate social responsibility. A random sample included 119 large companies located in the United States from the population of companies listed in the Russell 100 index. The data were collected via Bloomberg Terminal. Multiple linear regression analysis was used to predict Environmental, Social, and Governance (ESG) activity scores. The 3 predictor variables accounted for approximately 7% of the variance in ESG activity scores and the result was statistically significant, F(3,115) = 2.83, p < .04, R2 = .07. Although the p value was significant, the R2 was low representing a poor model fit. In the final analysis, total revenue was added to the model and was a significant predictor and negatively correlated with ESG activity scores; However, return on equity and leverage were not significant predictors of ESG activity scores suggesting the potential need to transfer some corporate social initiatives from business leaders to government policy makers. Future researchers should consider incorporating additional variables to make the model more useful. The implications for positive social change include the potential to identify fiscal incentives for corporate social programs by policy makers which benefit stakeholders such as employees, suppliers, customers, communities, and the environment.

Global sustainability challenges are becoming increasingly more severe and the deadline for the Sustainable Development Goals (SDGs) set in Agenda 2030 is approaching rapidly. Venture capital investments in sustainable start-up businesses is considered to be a key success factor for a long-term sustainable development across the globe. Evaluating which early-stage companies that can be considered truly sustainable can however be difficult to determine for venture capitalists, especially in early-stage investment rounds. This study has aimed to increase the understanding of sustainability assessment processesutilized by Swedish university holding companies. Data collection was mainly executed through semi-structured interviews with representatives from six university holding companies, an industry association, and a limited partner. The main areas of interest have revolved around three distinct topics: how sustainability is currently assessed by university holding companies, what aspects that influence the assessment capability and how the sustainability assessment process could be improved. These investigation subjects are also closely related to the articulated research questions. Empirical findings indicate that university holding companies mainly rely on intuition and mapping of prospects’ business idea against the Sustainable Development Goals established by the United Nations when assessing sustainability. The characteristics of prospects, the governmental entity responsibility and the organizational structure were all aspects that seemed to have great influence on the assessment capability. A five-stage impact measurement and management process was finally suggested for the university holding companies, consisting of: (1) reviewing the strategic mission; (2) conducting due diligence; (3) integrating metrics; (4) monitoring impact and; (5) evaluating final impact. Future studies are encouraged to adopt quantitative or longitudinal research approaches, while also including a greater number of interviewees from larger governmental institutions and impact-oriented investors, in an attempt to further generalize the findings of this study.