Stockholm (NordSIP) – Today (30 August), the Swedish occupational pension plan manager Alecta hosted a half-day seminar to discuss the interim report on Sustainable Finance by the EU’s High-Level Expert Group (HLEG) published last July. Alecta CEO Magnus Billing is the only Swedish member of the HLEG, which is composed of 20 expert members from the European investment community. The seminar was set up to discuss the findings of the interim report and assemble opinions from Nordic constituents. These will be taken into account in the HLEG’s final report, due to be published early 2018.
The keynote speaker at the seminar was Per Bolund, Swedish Minister of Financial Markets. Other guest speakers included Erik Thedéen, Director General at the Swedish FSA (Finansinspektionen) as well as Cecilia Repinski, Executive Director at Stockholm Green Digital Finance, among a range representative of influential Swedish investment firms and other financial constituents.
At the press conference, Bolund commended the HLEG’s on an impressive achievement in a short time frame. The level of analysis presented in the interim report was remarkable and most likely thanks to the fact that the HLEG is composed of active members of the investment community. The key points that were discussed in the morning included the dilemma posed by double compression. Double compression is a term used in the report to explain the mismatch in the time and risk dimensions, between the perspectives of the investment community and the issues presented by sustainability. Typically, investors’ time horizon is too short compared to the time needed to address social and environmental issues. The measures of risk are also generally too narrow in finance to capture economic, social and environmental sustainability. For Bolund, the morning’s discussion highlighted the need to take the long term into account in day-to-day decisions.
Another strong point was made about the need for incentives to be aligned in order to realign these two dimensions. Concretely, this means revising compensation models to get investors to prioritize the long term. Concerning the problems around risk measurements, Bolund emphasized the need to work on transparency, which in the context of the Swedish financial system would likely impact the requirements put on institutions such as the Swedish FSA and the AP-funds, the national pension buffer funds. He looks forward to the final report which he believes will be of great value for his own priorities.
Financial stability was mentioned by Thedéen as a target that can be enhanced by the more long-term investing approach advocated by the HLEG. “To read such a report is music to the ears of a regulator”, he commented [in Swedish]. Other aspects that were particularly relevant to Thedéen were the recommendations around disclosure and transparency. There is a risk, he fears, that mediocre and expensive financial products will appeal to consumers because they are labeled as green. It is therefore a priority for him to support the proliferation of good quality and affordable green financial products in order to protect consumers.
For Repinski, the report answers important questions. She also highlighted the presence of a strong momentum in sustainable finance. In an area that has typically been starved for capital, what will happen if this strongly growing demand for green investments suddenly finds a shortage of supply? It is in this context that, together with Stockholm Fintech Hub, and in conjuction with today’s HLEG meeting, her organization is launching an initiative to validate green investments using blockchain technology.
Picture (c) NordSIP – From left to right: Erik Thedéen, Director General at the Swedish FSA, Per Bolund, Swedish Minister of Financial Markets, Cecilia Repinski, Executive Director at Stockholm Green Digital Finance, Magnus Billing, CEO, Alecta