Published 2018-04-10

This post is also available in Swedish

Pleased with the buzz about sustainability

Emma Sjöström is a happy researcher. One reason is the intense activity associated with sustainability in the Swedish financial market. She is less satisfied with the American trend.
‘There, doors are now closing for those who want to work for a more sustainable world.’

She finds it strange that she used not to see the connection.

It seems especially odd because she comes from a family with a keen interest in environmental issues, but also because several of her fellow students on the MBA course in Uppsala wrote papers about sustainability.

‘Despite that, I didn’t realise it was possible to link my interests in economics and the environment.’

Today, this is self-evident.

She is also responsible for the Sustainable Finance research platform at the Mistra Centre for Sustainable Markets (Misum), based at the Stockholm School of Economics.

However, her road there was a somewhat winding one.

After graduating, her first step was to a gallery for exclusive oriental rugs in Manhattan.

‘I’d signed up for a trainee programme where there was a prospect of being located anywhere in the world. And of all places, I ended up in New York, looking after the carpet shop’s small office.’

After a year in that family company with five male colleagues, she went straight into a new trainee job, still in New York, in internal communication at an IBM project organisation with 500 co-workers. There, all her closest colleagues were women.

Just after that, two planes flew into New York’s Twin Towers and Sjöström felt that it was time to go home to Sweden.

Here, there was a recession and no jobs were to be found.

‘Suddenly, I was forced to ponder what I wanted to do. I realised I didn’t want to be a little cog in the middle of a giant machine. Instead, I wanted to do something that felt meaningful. After all, work is a big part of my life.’

She took her next big step in a new direction after reading Funky Business, the book by Kjell A Nordström and Jonas Ridderstråle.

‘It made me realise that doing research can probably be quite cool after all. By chance, just then, the Stockholm School of Economics was looking for a person to work on sustainable finance. Although I had no experience in the world of finance, I got the job.’

Lacking experience in that world was not, in fact, a problem. It is entirely possible to investigate sustainable investment from perspectives other than financial theory as such, in her opinion.

‘I study the financial market from an organisational theory perspective. My main interest is in investigating whether it’s possible to use the financial market as an arena for generating change.’

However, while taking her doctorate, she caught up on a great deal of financial theory, which has also been useful for understanding how the financial market arrives at decisions.

‘But it’s interesting to see who’s working on sustainability issues in the financial sector. It’s rarely economists — rather, a bunch of biologists and chemists.’

That could itself be a problem, she believes — especially because it makes many traditionally schooled economists regard the sustainability crowd as outside the mainstream, so their views are not always considered.

‘Specialist knowledge of sustainability is needed, of course, but the more thoroughgoing changes come only when traditional financial types step forward and include sustainability data in their corporate valuations. Then things happen, and that’s why Mistra’s initiatives in the financial sector are so important.’

One important aspect of running a sustainability programme at the Stockholm School of Economics is that many of its students later take up senior positions in the financial world. If they have become aware of sustainability issues during their studies, this can eventually lead to significant effects.

‘When I lecture students as a sustainability expert, I always try to encourage them to be critical of traditional thinking. And they’re interested — that’s evident, not least, because they often choose to write essays with a clear sustainability perspective.’

But is it possible to reconcile an economic system based on companies’ constant need to maximise their profits with the need for long-term sustainability?

‘Sustainability can definitely be a way to make money. The difference is that you’ve got to have a longer-term outlook than the next quarterly report.’

Although in parts of the financial market there is an understanding that short-termism can backfire, getting off the treadmill where most people are running today is not easy. This is especially true for companies that risk seeing their stock prices fall if there is the slightest dent in the profitability curve.

‘So we still see lots of companies engaged in corruption, violating human rights and trying to make money on unsound supply chains.’

For progress towards a more sustainable system to be feasible, Sjöström believes we must venture to think along new lines. Requirements include new business models and other incentive schemes, but also new interpretations of what value actually is.

‘It’s not going to be easy: old traditions make it difficult for individual players to modify the system. But we see that several major companies and financial operators are now out there saying that sustainability’s important, and they’ve begun to align themselves with the global sustainable development goals.

‘This may mean that some change is on the way. In Sweden, we’re fairly far ahead. Here, it’s now more the rule rather than the exception for companies to say they want to be more long-termist in their actions. And they have some way to go. A report from Misum, Walk the Talk, shows that only a small minority of the big Swedish companies have sustainability goals beyond 2020. We need to see a bit more action now.’

However, appeals to corporate and investor morality and ethics do not work. On the other hand, pursuing sustainability can evidently be in companies’ own interests: it can help to cut costs, reduce risk and create scope for raising new capital using green financial instruments.

‘In the Swedish market, there are some good examples of companies that have long been investing sustainably. Whether it then makes any difference in reality and for the environment is a question that both engages and divides us researchers.’

Sjöström is currently running a research project in which she is looking at investors who try to induce international energy companies to reduce their use of coal.

‘What I want to know is whether these dialogues are successful and what gives them a hearing for their ideas or prevents them from getting it. I also want to know what happens if asset managers choose to sell off their holdings in companies with poor environmental profiles.’

Seeking answers to awkward questions is Sjöström’s driving force. She pursues them with the positive basic view that reforming a sector with such weighty traditions as the financial market, too, is possible.

‘If I hadn’t believed in a change, it wouldn’t have been as interesting to spend so much time on the topic as I’ve done in recent years.’

Even so, there are largely discouraging days, especially when she perceives that political trends are going in the wrong direction.

‘I’m concerned that researchers and others working for a more sustainable world are coming under increasing pressure in the US. We also see ever-rising short-termism in politics, and that the country’s governed by an administration that doesn’t believe in science. At the same time, it’s encouraging that so many, despite the resistance, are managing to struggle on.’

The trend in Sweden is the opposite. Here, activity surrounding sustainability in the financial markets is lively.

’Being able to research in this area in Sweden is a luxury. Here, unlike in many other countries, it’s easy to communicate with companies and other stakeholders, and they’re interested in our results.’

The Stockholm School of Economics (SSE) has become an important centre for research, both nationally and internationally, in the area of sustainable financial markets. Mistra funds Misum and Mistra Financial Systems directly,, while the Stockholm Sustainable Finance Centre is a government venture that arose partly from a Mistra initiative.

Misum is the broadest research effort, while the Sustainable Finance Centre is intended to fuse the research conducted at SSE with that of the Stockholm Environment Institute. Sjöström is among those with the task of ensuring workable, fruitful collaboration.

Although these initiatives show some mutual similarities, they have their own routes into the research area.

‘A key task for everyone is to make sure the results of our research get out to people outside academia. One way we do this is through SSE’s in-service training programme for business economists in employment.’

Are we now heading for a higher level of research in the area of sustainability?

‘Absolutely, but for really far-reaching influence we’ve got to dare to challenge the system the financial market’s working in today. If we do, innovative ideas at Nobel Prize level might emerge, perhaps.’

Text: Per Westergård