The Nordics – Sweden, Denmark, Norway and Finland which have a global reputation for excellent performance in investing that emphasises on Environmental Social and Governance (ESG) standards and Socially Responsible Investing (SRI) and related international rankings – are eyeing Colombo’s stocks.
Investments from Scandinavian countries have grown by 54 per cent per annum compound annual growth rate (CAGR) since 2013, Colombo Stock Exchange (CSE) data shows. These are funds which believe that deliberately investing in companies with good behaviour or agitating to improve the behaviour of offenders — can deliver results. Scandinavian ESG funds and their business communities and government policies are often held up as an example to other countries. In general, socially responsible investors encourage corporate practices that promote environmental stewardship, consumer protection, human rights, and diversity. Some avoid businesses involved in alcohol, tobacco, fast food, gambling, pornography, weapons, contraception/abortion, fossil fuel production or the military.
There is a high degree of homogeneity among the Nordics in terms of all this in cultural as well as institutional investments.
In 2018 (January to April), Scandinavian countries have invested Rs. 7.8 billion in the Sri Lankan stock market, which constitutes 22 per cent of the total foreign purchases during the period, the Business Times’ research showed.
Amongst them Tundra and Coeli stand prominent. Tundra has US$ 150 million is in its Frontier Sustainability Fund, which has invested $ 20 million (12 per cent) of the fund portfolio in Sri Lanka.
Coeli, a Swedish asset manager is now at number 3 in the shareholder list at Nestle’s PLC as at March this year with 308,500 shares (0.57 per cent). Coeli Frontier Markets Fund has 7.5 per cent country allocation to Sri Lanka as at April 2018.
Opalesque, a publication which scours professional news services to participants in the alternative investment sector, has said that global service provider Northern Trust’s recent survey of 50 Nordic institutional investors in Stockholm found that 80 per cent among them expect investor allocations to alternative assets to increase within the next five years. Notably, half of these expected a greater focus on ESG factors within the investment process, with 25 per cent of these even saying ESG credentials would make or break deals. Analysts say that foreign investment can be driven by ESG and that specifying the underlying mechanism of foreign investors’ stock picking behaviour. They say that ESG compliant firms can attract foreign investment.
According to the Global Sustainable Investment Alliance (GSIA), assets valuing over $21.4 trillion have incorporated ESG concerns into their investment selection and management globally, representing 30.2 per cent of the total assets under management.
Analysts say that foreign investment can be driven by ESG and that specifies the underlying mechanism of foreign investors’ stock picking behaviour. They say that ESG compliant firms can attract foreign investment.