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6 - The regulation of institutional investment in Sweden: a role model for the promotion of responsible investment?

Published online by Cambridge University Press:  05 April 2014

By
Joakim Sandberg ,
Sebastian Siegl  and
Ian Hamilton
Edited by
James P. Hawley ,
Andreas G. F. Hoepner ,
Keith L. Johnson ,
Joakim Sandberg  and
Edward J. Waitzer
Joakim Sandberg
Affiliation:
University of Gothenburg
Sebastian Siegl
Affiliation:
Åbo Akademi
Ian Hamilton
Affiliation:
Umeå University
James P. Hawley
Affiliation:
St Mary's College, California
Andreas G. F. Hoepner
Affiliation:
ICMA Centre, Henley Business School, University of Reading
Keith L. Johnson
Affiliation:
University of Wisconsin, Madison
Joakim Sandberg
Affiliation:
University of Gothenburg
Edward J. Waitzer
Affiliation:
York University, Toronto
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Summary

Introduction

Over the last half-century or so, the Swedish capital market has increasingly come to be dominated by large-scale institutional investors, such as pension funds, mutual funds, insurance companies and other kinds of financial organizations. Recent estimates suggest that domestic and foreign institutions control more than 85 percent of all outstanding shares on the Stockholm Stock Exchange (Skog 2005; Stattin 2010). This makes the Swedish market among those with the highest concentration of institutional ownership in the world. In this context it is interesting to note that, according to many scholars, Sweden presents a unique regulatory environment for institutional investment; an environment with unparalleled emphasis on responsible investment practices (Richardson 2008; Robins 2006; Statman 2005). Much praise has, for example, been given to the investment mandate of the national pension funds (the AP funds), which obliges them to incorporate ethical and environmental concerns into investment decisions (Hamilton and Eriksson 2011). Sweden also has a comparably well-developed market for retail mutual funds with an ethical or environmental profile, especially in relation to the limited size of the country’s total fund market (Eurosif 2012).

This chapter introduces and discusses some main features of the Swedish regulatory environment with regards to institutional investment, with special emphasis on the connection to responsible investment. We start by introducing some of the main legal statutes concerning institutional investment and compare them with the fiduciary duties imposed on trustees in other countries, such as the UK and the US. Thereafter we discuss the more specific legal framework relevant for mutual funds and pension funds, respectively, and especially discuss their mandate for engaging in responsible investment. Given the centrality of the AP funds, we then present and analyze a case study of how the AP funds developed their understanding of the government directive about taking ethical and environmental concern. Finally, we end with a discussion of to what extent the Swedish regulatory framework should be considered a role model for the promotion of responsible investment in other countries.

Type
Chapter
Information
Cambridge Handbook of Institutional Investment and Fiduciary Duty , pp. 59 - 71
Publisher: Cambridge University Press
Print publication year: 2014

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