Challenging Government on Sustainability Requirements

Stockholm (NordSIP) – The following is an article by Staffan Hansén and Åsa Wallenberg, CEOs of SPP and SPP Fonder respectively, that appeared [in the Swedish] in the April 25th edition of the publication Aktuell Hållbarhet. The article has been translated here to reach a broader readership.

Sweden’s red-green coalition government has announced SEK500 million in climate initiatives in, among other things, biogas and solar cells in its spring budget. The allocations are welcome, but a drop in the sea in comparison to what state-owned companies’ own investments and pensions procurements could deliver if the government began to implement the sustainability requirements it talks about.

Since the beginning of the year, Sweden has obtained unique climate legislation that we and many other sustainable companies welcomed. But if the Swedish industry, transport, energy and housing and agriculture sectors all reduce their emissions by 63 per cent by 2030 – which is the government’s objective and in line with global targets – the climate initiatives appear to have a big blind spot: capital. The sustainability requirements imposed on pensions and asset management are low, or don’t exist at all.

Finance Minister Per Bolund recently submitted a legislative proposal for how the premium pensions system will become more sustainable and subject to certain sustainability requirements. This is a step in the right direction. However, the provisions for the premium pensions system constitute a marginal part of total pensions capital.

Åsa Wallenberg, CEO SPP Fonder

Collective occupational pension contracts comprise capital of approximately SEK2000 billion, of which the majority was procured completely without sustainability requirements. When SPP surveyed 35 of 48 total state-owned companies in 2016, it found that the majority relied on the notion that sustainability requirements are set in the collectively agreed occupational pension scheme – but this is not yet the case. For the voting control boards, sustainability requirements are still not determining.

Capital is often also invested in the complete opposite direction to the line established by the global development goals [SDGs – ed.] agreed upon by world leaders and industry. For a government that says it is working for ‘a sustainable Sweden’, this is unacceptable.

In addition to the opportunity to take a leading role in the shift towards a more sustainable society, it is simply smarter business to invest sustainably. In this, SPP and many other players agree. Among other things, reports from the Pension Authority show that sustainable-labelled funds performed better than others.

In order to restore the flow of capital in the right direction, change is required within two crucial bodies: the government’s own procurement authority, and the electoral boards of occupational pensions.

The government has said that the procurement authority should “be at the forefront of real change in society”, but guidance for those who want to procure sustainable capital and pension management is lacking today. The government should therefore take the opportunity, act according to its convictions and live as it learns by also introducing clear [sustainability] guidelines for capital.

In addition, the occupational pensions election boards should be subject to the requirement of having sustainability criteria in their procurement. Both the guidelines for the procurement authority and the requirements for the electoral centres should include the global sustainability targets. These would constitute a reasonable framework in line with which pension companies can reasonably comply.

Image: (c) SPP