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LONGTERMISM IN

INVESTMENT ANALYSIS

LONGTERMISM IN INVESTMENT ANALYSIS

To deliver on the 2030 agenda, financial decisions need to better align with sustainability priorities. And while interest and momentum are high, actual capital deployment is far from where it needs to be to ensure the implementation of the Sustainable Development Goals.

SSFC is partnering with Swesif to explore where the critical barriers are for investment analysis in terms of longer time horizons through which sustainability and financial priorities can better be aligned. This will be done based on a combined survey and interview study as well as through workshops with financial analysts and corporate representatives. A report will be published to summarize the findings and the results shared. Finally, these findings will be shared widely in relevant policy and industry fora.

This joint project would not only address an increasingly important, yet far from sufficiently discussed topic, but it is also an opportunity to demonstrate constructive collaborations between research and industry. It will hopefully bring to light the issue of short-termism, especially in the context of the European Commission’s Action Plan for sustainable finance and in light of the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). The project will be finalized in spring 2019, with a potential second phase, depending on findings and responses from key stakeholders such as financial actors and policy makers. 

BACKGROUND

Short termism has long been identified as a critical barrier for financial markets to integrate sustainability as a strategic issue. The current dialogue between companies and investors, and via sell-side analysts, seems to be reinforcing these short-term horizons in investment decisions even further. 

Investment decisions that fail to consider long term issues can lead to the mispricing of risk. For example, a supplier of fossil fuel vehicles may suffer from emerging climate policies and regulations. Indeed, these risks are financial, but go unnoticed due to the short sightedness of the market, and at the expense of sustainability priorities. At the very core of investment decisions, sustainability and financial priorities are not aligned, despite the risk for mispricing assets.

SWESIF

Swesif is an independent not-for-profit association founded in 2003 to foster sustainable investment and support its members in their sustainable investment efforts. Swesif’s activities include regular seminars, discussion luncheons, a widely adopted transparency standard for investment funds, and investigative projects into ESG matters.

CONTACT

Research Platform Manager – Sustainable Finance Research Fellow at Mistra Center for Sustainable Markets (Misum), Stockholm School of Economics
Emma Sjöström
emma.sjostrom@hhs.se
Responsible Research Planning at Stockholm Centre Sustainable Finance and Research Fellow at Stockholm Environment Institute (SEI)
Aaron Maltais
aaron.maltais@sei.org

RESEARCH PARTNER

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