Pension funds as active and socially responsible owners - A study of the First to Fourth Swedish National Pension funds

Abstract

Background: There are a number of problems surrounding social responsible investing (SRI). The ways in which it is most often conducted has met heavy critique since it is often found completely toothless in making a difference. The practices common in many ethical funds, of a passive ownership where stocks are sold and bought based on if they are found to be ethical or not, has also been criticized. Many agree that the best way of making a difference is by being an active owner. This however, requires a lot of engagement and large holdings to work well. Researchers find that pension funds could be ideal investors for engaging in active ownership. Problem: Can the Swedish National Pension Funds make a difference in their investments abroad by the means of active ownership and what are the reasons for the pension funds to do this? Purpose: The purpose of this study is to give an insight into how the First to Fourth National Pension funds invest and to show if, how and why an active ownership could have the effects on social responsibility issues where other methods are said to have no effect.

Limitations: The Study is limited to investments abroad of the First to Fourth Swedish National Pension funds.

Methodology: An explorative study is undertaken to investigate this topic of research. Data was collected through semi-structured interviews with relevant individuals from the Third and Second Swedish National Pension funds and Folksam as well as from analyzing information given out in reports. Empirical results and conclusion: The AP funds try to be active owners, increasing their power to influence companies to act socially responsible. This is mainly done through voting at general meetings, through face to face meetings and through other means of dialog with the company in question. Active ownership can be beneficial to the AP-funds if they manage to minimize negative externalities and capture positive externalities since they can be regarded as global owners.