The Swedish Foundation for Strategic Environmental Research
Supporting research of strategic importance for a
good living environment and sustainable development
Several of our calls and awards have I feel been very well timed to fit in with the changes we’ve seen in the world around us in the past year. You get windows of opportunity opening up, and that’s when you need to be there with a research programme or a call for proposals to match that window.
Mistra has launched several highly topical research programmes in 2016. One of them is Mistra Geopolitics. We started work on it in the face of the migration movements in Europe, and it became even more relevant, geopolitically and in security terms, with the discussion about the transatlantic axis and the future of NATO. Clearly, this is a programme that comes at just the right time.
Another of our programmes is about making financial systems sustainable – Mistra Financial Systems. During the year we awarded the Stockholm School of Economics funding for a programme on the financial system. We felt that now or never was the time to get research under way – it was now the user community was ready to take in information. There’s a shortage of information, but also a widely expressed need for evidence to guide decisions, for instance data on how climate affects financial investments. That’s made clear by the fact that the G20 countries have identified climate as a risk to financial stability.
A third is concerned with how Sweden is to achieve its climate goals by 2045 – Mistra Carbon Exit. We now have a research programme to look at how these goals are to be reached. The goals have been set and a structure to monitor progress towards them is in place, but how are they to be achieved? This is a very exciting programme. To me, the new Climate Act and the goals that have been set are a positive challenge. That’s how I think this should be seen – as a chance for Sweden to develop on the basis of what we see as our goals for the future. It’s a challenge that will definitely drive innovation, and we want to help support that innovation.
In 2016, funding was also awarded for programmes on mobility, smart materials and sustainable use of plastics. In addition, there has been a new focus this year on closer cooperation between Mistra’s research programmes. What we are doing now is making sure, with our new programmes, that it’s written into their agreements that they have to work together. But the question then is who you are to work together with. How should we divide our programmes into thematic areas? I’m sure we’ll see overlap here, rather than separate silos. Sometimes a programme may turn up under several themes, or you may get completely different combinations, depending on your perspective. This gives us better strategic control of what we’re trying to do.
Under its Statutes, Mistra is to promote a better living environment – but how can that be measured? We’ve tried to put more emphasis on this during the year, so already at the call stage we ask applicants to tell us how they intend to measure the outcome and impact of their work. You get outputs from a research project – findings, publications and so on. These generate an outcome, which in turn has an impact on society. In fact, it’s the impact on society that our Statutes are talking about when they define the purpose of Mistra.
How has the Foundation done financially in 2016? It’s been a good year, and if we go back five years we see that there’s been an average annual return on our capital of 10 per cent. This is money that’s very important for research – it means we can fund this kind of research for longer, or provide higher levels of funding. We feel that this year we’ve created a very well-balanced portfolio that will withstand setbacks such as economic crises, without our losing too much of our capital.
But the portfolio also has to be environmentally sustainable. I’d say that we’ve been among the world leaders when it comes to managing our assets in a sustainable way. In 2016 we did a lot more work with a toolbox to guide our fund managers in a sustainable direction. I have to say, though, that that’s relatively easy, because we’ve chosen managers who have a focus on sustainability. It’s very much a matter of trust and dialogue, and when difficulties arise in a company or with other investments, we can have a constructive dialogue about them. Above all, we want to choose companies with the potential to help find solutions, for example when it comes to moving towards the 2 °C target or meeting the UN’s Sustainable Development Goals.
A book from Mistra and the All Party Committee on Environmental Objectives, in which experts give their views on what kind of climate policy Sweden needs to pursue, was presented to the Minister for the Environment.
Projects on air pollution, new lubricants, and recycling of brass and low-energy bulbs received funding of SEK 20 million through Mistra Innovation.
A new Mistra programme aims to develop a better understanding of integrated services to facilitate sustainable mobility and transport.
Johan Söderström took up his position as the new Chair of the Mistra Board. With his background, he hopes to develop Mistra’s work on industrial applications of research.
In an open letter, researchers drew attention to shortcomings in an EU proposal on endocrine-disrupting chemicals and presented a risk assessment method originating in MistraPharma.
Representatives of several of Mistra’s programmes were in Visby to discuss issues such as sustainable lifestyles, new threats to forests, and wise approaches to climate change.
For the first time, the world’s experts on environmental systematic review met for a conference in Stockholm hosted by Mistra EviEM.
Mistra plans to fund a new interdisciplinary research programme to show how high quality of life can be combined with sustainability.
An international consortium headed by IVL Swedish Environmental Research Institute is to run Mistra’s new climate research programme.
A better evidence base on how geopolitics affects sustainable development is the aim of a new research programme with Mistra funding of SEK 48 million.
Mistra funding of SEK 51 million over four years has been awarded for research on methods and materials with the potential to remove environmentally harmful substances from air, water and soil.
Mette Morsing was appointed to the Mistra Chair of Sustainable Markets, a newly established professorship at the Stockholm School of Economics.
Researchers from Mistra Arctic Sustainable Development and the Stockholm Resilience Centre presented the threats facing the Arctic and options for the future.
High-rise wooden buildings, biorefineries and digitisation were among the options for the future discussed by forestry sector representatives at a workshop hosted by Mistra.
Several researchers involved in Mistra programmes were among the 40,000 delegates at a UN conference on urban development, keen to play their part in promoting sustainable and just cities.
Under the Mistra Fellows scheme, two researchers have now been given the opportunity to work abroad, on Arctic issues in Washington DC and on sustainable markets at the OECD in Paris.
Mistra Biotech presented findings on the contributions new potato varieties, nitrogen-efficient crops and other biotechnology can make to food production.
To help refugees establish themselves in Sweden, Mistra now offers individuals with an academic background trainee placements on its research programmes.
The Future Forests programme presented the results of eight years of research, highlighting among other things a need for greater consensus in the forestry sector.
Funding was awarded for a new research programme led by the Stockholm School of Economics, to explore what part the financial system can play in achieving a more sustainable society.
Mistra awarded funding for a programme to study sustainable ways of making and using plastics, led by Lund University.
Mistra Indigo summed up its research at a conference on the interaction between international and Swedish efforts to tackle climate change.
Over the past year, Åke Iverfeldt has been a member of two prominent groups of experts discussing Sweden’s competitiveness and sustainable business opportunities.
A systematic review by Mistra EviEM showed that wetlands are effective traps for nitrogen and phosphorus, provided that the flow of water through them is reasonably low.
Six questions to Johan Söderström, ABB’s Country Managing Director Sweden and Chair of the Mistra Board
It’s been a very rewarding time, and one that has broadened my horizons. Great to get to know all the capable and knowledgeable people working for Mistra. It’s also very inspiring to see the important work being done on the research projects and at the various universities. I’m really impressed by the incredible knowledge bank that exists within Mistra.
Being asked to chair Mistra was both challenging and appealing. I’ve been interested in the environment and sustainability ever since I was a young member of Nature and Youth Sweden. To this day, I like to go birdwatching by Asköviken near Västerås. Another factor is the strong focus on sustainability that we have at ABB, which has deepened my interest. The UN’s 17 Sustainable Development Goals point the way, and I greatly value the opportunity I’ve been given to contribute to Mistra’s extremely important long-term investments in a sustainable future society.
These are issues that matter to us all, so it’s very gratifying to see more and more people in industry going from dutifully talking about the environment to taking action to bring about change.
In Sweden we have every chance of succeeding. We have a shared responsibility for future generations, and together we can make a real difference. An important factor here is the unique collaboration that exists between business people, academics, politicians and other sectors of society.
For many years now I’ve had the privilege of working in industry and in leadership roles. Although I’m convinced that sustainability is fundamentally more important to our long-term survival than technological progress, it’s by using technology in the right way that we can bring about a sustainable society. Hopefully, my experience will allow me to offer new ideas and angles.
I’m also convinced that we need to be better at handling the social dimensions of societal and technological change. This could be an increasingly important area of work for Mistra in the years ahead.
Politicians’ attitudes to science and the environment present us with new challenges. Mistra has a key part to play in developing and encouraging research that is at the cutting edge. Its expertise can be a positive force when it comes to environmental and sustainability issues.
In that context, Mistra is ideally placed and we need to focus our energies on moving forward. Our capital has been managed so successfully that we’re now in a position to provide even more funding for research programmes. So we shouldn’t back off, but rather step on the gas. The Stockholm Resilience Centre is a brilliant example of how research initiated by Mistra can assume global significance.
The fact that there is both breadth and depth to Mistra’s research is a great asset when it comes to meeting future challenges. The stable base that we have also means we can take a long-term approach and support long-term programmes that produce results. That way we can make a difference, but we always need to think about what we have in our research portfolio. For one thing, we need to strike a good balance between theory and practice.
There’s great potential to develop Mistra so as to achieve even more progress towards sustainability. I’m very pleased and excited to have the opportunity to do that together with Mistra’s knowledgeable Executive Director and staff, with the other members of our capable Board and in close collaboration with business – for example, through Misum, the Mistra Centre for Sustainable Markets. Together we can help to make Swedish companies more competitive.
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Managing Mistra’s capital for more sustainable development
It is perfectly possible to combine sustainable investment with a good financial return. Mistra’s own record of asset management makes that clear. Its investments have been guided by sustainability criteria for over a decade.
For many years, Mistra’s capital has been managed with a steady, high rate of return. In 2016, for example, the return on assets managed was 8.1 per cent. The average return over the period 2012–16 was around 10 per cent per year – 2 percentage points above Mistra’s benchmark index.
‘When we started applying sustainability criteria, though, a lot of people said: “Surely you realise that if you exclude companies on sustainability grounds, you won’t get as good a return?” But our investment record in fact shows that we haven’t sacrificed returns by insisting on sustainability,’ says Märtha Josefsson, Chair of Mistra’s Committee for Asset Management.
Mistra began working with sustainability issues in the management of its assets in 2003, and since 2007 the whole of its capital has been invested on the basis of sustainability criteria.
‘We want to manage our assets in a way that promotes more sustainable development, while also influencing the financial sector, decision-makers and companies,’ Josefsson explains.
To oversee its investments, Mistra has a Committee for Asset Management, made up of the Foundation’s Executive Director and several leading figures from the financial sector. The Committee is guided by an investment policy approved every year by the Mistra Board. This policy stipulates that investments are primarily to be made in companies that clearly report their environmental and social impacts – both negative and positive – and in those that systematically seek to minimise the negative impacts and optimise the positive impacts of their operations.
‘Businesses that take sustainability into account in the long term are the kind we want to invest in,’ says Josefsson.
A major share of Mistra’s capital, roughly 45 per cent, is invested in Swedish and foreign equities, and around 35 per cent in fixed-income securities. The exact breakdown between the two varies over time. In recent years, there has also been a growing proportion of ‘alternative investments’. At the end of 2016, just over 15 per cent of the total was placed in such investments, which tie up the capital for somewhat longer – for instance, real estate, hedge funds, venture capital funds, and what are known as microloans.
‘This last category offers an opportunity to secure a return on our capital, while contributing to Third World development,’ Josefsson explains. ‘Our capital is lent to major development banks, which in turn provide loans for small business start-ups.’
Mistra does not have an in-house investment team, entrusting the work instead to around a dozen banks and other external managers. One of the most important responsibilities of the Committee is to select and evaluate those managers. The Committee also engages outside consultants to regularly monitor the companies Mistra owns shares in – to make sure they are not in breach of any of the criteria laid down.
Mistra manages a substantial sum of money, currently around SEK 3.2 billion. In the broader scheme of things, though, it is a small player – each of the Swedish National Pension Funds, for example, manages around SEK 350 billion. Mistra’s size means that it is harder for it to make explicit demands on companies – for instance at an AGM – but according to Märtha Josefsson it also has its advantages.
‘We’re not afraid to try out new ideas in asset management, or to be the first investor.’
When London-based fund manager Generation Investment Management, for instance, was set up in 2004, by former US Vice-President Al Gore and others, Mistra was the first institutional investor in its global equity fund. Today, the firm, which has integrated financial and sustainability analysis from the outset, is a strategic partner of Mistra.
Likewise, when ‘green bonds’ appeared on the financial market a few years ago – a more direct way of persuading companies to think green than share ownership, according to Josefsson – Mistra was among the first to invest.
Mistra has been a pioneer in sustainable asset management, and has tried by a variety of means to create wider understanding of it. For instance, by openly publishing its investment policy, producing publications, and attending and arranging seminars. The other year, the Foundation signed the Montréal Pledge, undertaking to disclose the annual carbon footprint of its investment portfolio. Mistra has also previously funded a research programme on sustainable investment, and related research is currently under way at Misum and in the Mistra Financial Systems programme.
‘In various ways, we want to encourage more sustainability thinking in this sector, and to show managers and other investors that it’s possible to invest sustainably without having to forgo a good financial return.’
Märtha Josefsson has been a member of Mistra’s Committee for Asset Management for almost fifteen years, most of the time as its Chair. Over that period, she says, a great deal has happened.
‘These days, it’s no longer difficult to invest sustainably. I believe that Mistra has helped get us to that point, and I hope we can continue to serve as a model to others.’
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Birgitta Jonsson Palmgren
Chief Financial Officer
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Christopher Folkeson Welch
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