The wait is finally over for those not fluent in Finnish, yet eager to read Sustainable Investing: Beating the Market with ESG by Tiina Landau, former senior responsible investment officer at Ilmarinen, and Hanna Silvola, associate professor at Hanken School of Economics. Published in 2019 under the original title Vastuullisuudesta ylituottoa sijoituksiin, the book has already become a classic in Finland, featured as exam material for investment certificates and a recommended read for finance professionals. As the English translation is about to hit international bookshops in early June, NordSIP brings you a brief preview to whet your appetite.
A collaboration between a scholar, Silvola, and a practitioner, Landau, the book is an attempt to cover both the latest findings of academia and the efforts of investors to incorporate sustainability in their day-to-day work. The authors blend skilfully the necessary definitions and numbers with practical examples and excerpts from interviews with those working in the field.
This new translated edition isn’t exactly the same text as the 2019 original. Several cases have been updated and interviews were added to provide a wider international perspective. “It is a fast-moving field and we had to put in quite some work to keep the content up to date,” Landau told NordSIP.
Divided into five parts, the book starts by revisiting the purpose and mechanisms of sustainable investing in general, before diving into the nitty-gritty details. The second part, examining the concept of active ownership, provides extensive and relevant case studies of investors, successfully engaging with investees to promote sustainability. Time after time the authors emphasise the many merits of collaborative engagement, between shareholders and companies, as well as among the various stakeholders. Another key takeaway from the case studies is the importance of open and proactive communication between the parties involved.
In the next chapter, Landau and Silvola proceed to explain how to conduct sustainability analyses and discuss the sustainability of various investment products. Once again, rather than simply describing the tools and methods of the trade, they illustrate those with valuable examples. We also get to read the testimony of practitioners who have been through the implementation journey and are willing to share their experience. The emphasis is, understandably, on listed stocks although other asset classes are mentioned briefly as well.
The summary of research-based information about the profitability and return impacts of sustainability in chapter four benefits greatly from the fact that the authors dare to ask some uncomfortable questions. They discuss a variety of topics, from greenwashing to whether ESG outperformance will disappear once sustainability becomes mainstream. Most of the chapter is based on interviews with experts from 18 Nordic investment organisations which also provides a useful overview of the current state of sustainable investing in the Nordics.
Landau and Silvola wrap it all up in the concluding chapter by glimpsing into the future, discussing changes in legislation, sustainability megatrends and investment activities that are key for investors.
It is not an easy task to cover the topic of sustainable investing in a comprehensive and coherent way. As with all relatively young areas of knowledge, there are plenty of uncertainties and few principles that everyone agrees on. Towards the end, the authors themselves admit it, writing: “There is no single universal theory for sustainable investing. The definitions and international frameworks discussed earlier in this book guide the notion of sustainable investment. Based on them, each investor determines their own sustainability strategy.”
This book does not read like a smooth narrative and was probably not intended to do so. It is more of a compendium, a reference book to reach for when you are struggling with a convoluted sustainability-related question, or when you need inspiration and some practical advice from a more experienced peer. We can only hope that the two authors will keep the book alive, revising it and adding new material as the field evolves.
“Academia isn’t yet providing a comprehensive education in the matter of responsible investing,” Landau said in an interview with NordSIP in 2019, sharing her thoughts on what she perceived as a gap between the growing demand for sustainability expertise and the lack of educational material. Sustainable Investing: Beating the Market with ESG is certainly a step forward in bridging this gap. Alongside the authors, we too “hope that the book encourages investors to approach new ESG tools with healthy curiosity and criticism.”
Photo credit: Tomi Parkkonen (cropped) / Original book cover, published in English by Palgrave Macmillan / NordSIP