Our method of working

Assets with a clear focus

The Church of Sweden’s work with responsible investment has been ongoing for many years and is under constant development.

Asset management is based on the financial policy adopted by the Central Board in 2010. The policy is based upon two fundamental values:

• the principle of human dignity and the concept of stewardship as reflected in international environmental and

• human rights conventions and existing frameworks for responsible business.

Based upon these two principles, asset management complements other efforts towards sustainable development within the Church of Sweden, at home and abroad. Lately, all dioceses have adopted similar policies.

The financial policy states we should be active and long-term asset owners

We attempt to impact society in positive ways through:

The companies we invest in

Our focus lies on well-managed companies that integrate sustainability into their business operations. At the same time, we do not invest in companies within controversial sectors that are considered to be problematic in light of the fundamental values of our Church. This regards for example, companies who extract fossil energy sources or manufacture weapons or tobacco.

The asset managers we select

We invest our assets in funds whose managers have a high level of expertise in integrating environmental, societal and corporate governance factors into their investment decisions.

We also contribute to new financial products being released onto the market by creating our own funds (such as SEB’s Ethos funds) and also as seed investors for new sustainability-oriented funds to be able to start.

Being active owners

We utilise our opportunities as an asset owner to influence individual companies and sectors, as well as the financial industry in general. We make our views known and choose partners who, like ourselves, aim to be responsible investors with a long-term perspective. 

Corporate governance

Corporate governance regards how a company shall be governed, regulated and controlled to satisfy owners and stakeholders. The scope of the Swedish Code of Corporate Governance also includes board responsibilities and roles, as well as auditing and reporting.

Read our financial policy and investment instructions on this page. 

Commission, asset management model and follow-up

The commission given to us by the Central Board of the Church of Sweden places clear focus on the long-term performance of asset management for the Church of Sweden at the national level. The overall target return is 3.0 per cent per annum above inflation measured in rolling ten-year periods.

The model we employ in our asset management to achieve this target consists of the allocation of assets, choice of fund manager and follow-up.

Allocation of assets

To create prerequisites making it possible to achieve the long-term target, we use a strategic reference portfolio that we then also use as a reference portfolio when evaluating our asset management against the 10-year time horizon.

When we decide upon a reference portfolio, we base our decision upon the real target return of 3.0 per cent with a time horizon of ten years. The reference portfolio shows the optimal division among equities, obligations, securities, real estate and alternative investments so that we can reach our long-term target in relation to the risk level we have decided upon. The calculation is based upon data regarding historical returns and the correlation between asset class, as well as prognoses for expected, long-term returns in each asset class.

Choice of asset managers

When the Church of Sweden on the national level chooses asset managers, it focuses on two overall areas: the sustainability orientation in the portfolio and the capacity to deliver a stable financial return.

In regard to sustainability, the asset manager has to correspond to our requirements based upon our financial policy and investment rules concerning ethics and sustainability. The asset manager shall have a good capacity to integrate factors such as the environment, societal issues and governance in the financial analysis of the company.

Regarding financial capacities, it of course facilitates our decision-making process, if the asset manager can show positive past performance, however, in the final analysis much is based upon confidence.

Follow-up of the asset manager

In addition to the target return, we continually evaluate individual asset managers and the total portfolio. The asset managers are compared with the relevant benchmark indices. For the total portfolio, we compare returns against our weighted benchmark index. We calculate a benchmark return based upon the different asset classes’ weights in the strategic reference portfolio, which is in turn based on what each individual index has yielded in returns.

In addition to the financial evaluation, we also review the asset manager and holdings based upon our sustainability requirements using independent, external screening. 

The Investment Process

A Method That Leads to Sustainable Investment

The investment process is described as a cone, as shown above. The asset managers will select a number of companies from their investment universe (a large number of companies available to choose from for the portfolio in question).

Then, the managers conduct both a financial analysis and a sustainability analysis to ensure that the eligible companies for the portfolio fulfils all established requirements including the financial policy of the Church of Sweden. Lastly, the optimal portfolio is constructed (step 1-3).

Screening and Company Engagements

In addition to the research and screening conducted by the asset managers, we engage independent consultancy firms to perform a control screening at least once a year.

The screening checks that no company is in breach of the exclusionary criteria for controversial businesses and if any of the companies have acted in contravention of corporate responsibility frameworks and international conventions intended to protect human rights and the environment. If such is the case, the screening consultant investigates the allegations.

If these prove to be real and point at serious flaws in the company management, the screening firm would initiate an engagement process, where the Church is also invited to participate. Additionally, we conduct other engagements, often together with other investors to get a higher impact, on various themes that we consider important from our viewpoint as a responsible investor.

The aim is to influence the companies to take measures and prevent shortcomings in their operations. Depending on which measures the companies take and the gravity of the allegations, a decision is later taken as to whether the holdings will be retained or sold.