Enjoy this interview with Emma Sjöström and Esgaia's Head of Stewardship Success, Rickard Nilsson, where we gain insights from her twenty years of researching sustainable finance and shareholder engagement. Emma explains why investment stewardship is interesting from a research perspective, what she would like to see more of, and how we should go about digesting research from different parties across the ecosystem. Today, Emma is a Research fellow and Co-director of the Sustainable Finance Initiative at Misum, Stockholm School of Economics (SSE).
Q: Tell us a bit about your interest in and the role of academia, and what made you choose that career path?
I was drawn to academia because I like to investigate things, and to get an outlet for my curiosity. I enjoy qualitative research where I get to interview people and understand and analyze the dynamics, interplays and process at different organizational levels. And I love to write, especially to help educate others. I considered journalism, but research allows more time for reflection and deep diving. I am also passionate about sharing research with key stakeholders in and around the financial market; it’s a pity that so much of it stays within the academic community.
Q: Why are investment stewardship and shareholder influence interesting from a research perspective?
The financial market is not just a space for trading or redistributing risk, it also plays a role in supporting broader stakeholder interests. From an organisation and management perspective, it's relevant to explore the mechanisms of change and influence in this context, especially since stewardship is a growing phenomenon. Investors spend a lot of resources on stewardship practices, so to better understand the dynamics and the effects - or lack thereof - is central. There is also some tension between the logics of financial issues on the one hand and environmental and social issues on the other – sometimes they can go hand in hand and sometimes not, and in any event the latter tends to also have intrinsic value. To understand how investors can come to grips with this is both relevant and intriguing.
Q: Having read some of your research, is there anything you’d especially like to highlight or mention?
That the effects of stewardship are not always direct or tangible and thus not easily reported on to corporate stakeholders. Over time, stewardship practices can contribute to a change in norms about what is in the realm of corporate responsibility, or aspects such as strengthening sustainability officer’s mandate on certain issues. So, effects are not only what we can measure in ESG metrics.
In a recent project we also studied private engagements from a communications perspective and we posit that investors can take on different roles in order to build relational authority – the diplomat, the advocate and the coach. This tends to happen intuitively, but we think there could be merit for investors to use it more intentionally and strategically during the engagement process.
Q: In terms of future research, are there any notable trends among fellow researchers? And what are some areas you believe deserve extra attention?
The research follows the empirics since we need data to base the studies on. So, in sustainable finance and investment generally, I would expect more research on biodiversity, ESG in fixed income, the effects of EU regulation - to name a few. In the stewardship space, I think we will see more research on system-level stewardship as some pension funds seem to be moving in that direction. Personally, I would like to do more research on boards in connection to ESG. I have already studied how investors are seeking to use the mechanism of nominating board candidates with climate-related expertise in order to influence companies’ strategic direction, and I would be curious to explore this further. Board diversity is also interesting to me, not the least from the perspective of what women’s pathway towards board seats and particularly the chair may look like. We only have eight percent of listed companies chaired by women in Sweden; it’s a topic that merits attention both locally and globally.
Q: Given the large amount of research and studies being produced, how can investors think about these different research categories/parties in the ecosystem?
There is a lot of biased research out there, often from consultancy firms and other market actors but sometimes even from academia. Correlation studies that claim causality is an example. Recently, there has been some pushback on studies on DEI for that reason, where critics have highlighted that it is not helping “the cause” if studies that show the hoped-for results but are flawed in their method or analysis are used to prove a point. So, taking the time to read the research in full and think about it critically is advisable. People would be surprised over the amount of low-quality research out there; sorry for sounding gloomy!
Q: Last question, any final wishes and asks from the investor community?
To employ your best thinking around how the financial sector at large but also your own organization can best contribute towards our grand challenges. The financial sector can’t go at it alone, obviously, but since we have crafted the financial system ourselves it is on us – you – to make it work for whatever common vision we have about the future. In terms of stewardship, my best advice would be for investors to be very clear on their theory of change.
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Emma has studied sustainable finance and especially shareholder engagement for the past 20 years. She is particularly interested in the mechanism that might make the engagement process successful. Parallel to her academic work, she runs the knowledge agency Hållbart Kapital, to facilitate research-based learning for financial market actors.