Introduction

General importance of sustainability (The bourgeoning field article)

The term sustainability has become an omnipresent term as the world is facing both climate
and economical challenges (Sarpin, Hasan, & Iskak, 2021). Sustainability refers to the need of
addressing current demands without jeopardizing the ability of future generations to address
their own demands. Due to the current world situation, companies must take responsibility for
their decisions. With the impact of global industrial development which has led to climate
change, increased inequality, and resource depletion, sustainable development has become a
highly prioritized area for companies.
Introduction to ESG
Corporate Social Responsibility (CSR) refers to integrating Environmental, Social, and
Governance (ESG) factors into investors’ portfolio decisions and financial decision-making
(Liang & Renneboog, 2021). ESG is seen to be significant components in determining how
effective corporate sustainability is, according to Teng et al. (2021). A wide range of
stakeholders, including investors, are increasingly calling for the disclosure of non-financial
information apart from what is usually included in financial statements. Looking into ESG
risk and management techniques is also of increasing interest to the stakeholders. The ESG
rating (or ESG score) is created to measure how susceptible businesses are to ESG-related
problems (Liang & Renneboog, 2021). These problems can be e.g., energy efficiency, board
independence, or worker safety. The rating is usually provided to publicly listed companies,
and the information is gathered through its own reports, news items, and third-party reports.
There are many different providers of ESG scores, and their methodologies and input for
calculation may vary. Thus, the ESG score of a company may vary across different ESG
databases.
Kan det kort nevnes CSR, corporate social responsibility? Jap, kan få inn det
Introduction to Sustainable Investment (Can sustainable investment save article, The
optimal solution article)
Sustainable investment is a term that has been attracting investors globally over the last few
years (Kölbel, Heeb, Paetzold, & Busch, 2020). Sustainable investments are described as
investments that also consider ESG information and not only profitability. Investors are
attracted to this form of investing as they are looking to make a positive impact. Banks and
asset managers are meeting these rising demands by providing an increasing number of
investment opportunities that have an emphasis on ESG criteria (Camilleri, 2020). As the
focus on environmental issues is becoming an extremely important talking point, sustainable
investment is being discussed by policymakers as a viable tool for reducing climate change.
Possibly making it an essential part of managing to realize the United Nations’ Sustainable
Development Goals.
This paper will be presented as follows…
This paper will investigate the phenomenon of sustainable investment. The following section
will describe the research objective and what subcategories the review is aimed towards.
Following, in section 3, the methodology of the investigation will be accounted for. Section 4
will present and discuss the results, while section 5 displays the current research gaps that
exist in the literature. At last, the findings of the review will be concluded.

Further research Intro

After conducting a thorough literature review, some research gaps have been identified in all
of the chosen sub-topics. These gaps are areas for potential further research and where there
are possibilities to broaden the knowledge of sustainable investment.

This study reviews 79 scientific articles on the topic of sustainable investing, with the sub-
topics of financial performance, strategies, and investor motivations. Something that have
revealed certain themes in the present-day consensus in the existing literature and potential for
future research.
General about SI strategies
Article 22- 25 må oppdatere hoveddokument med all tekst grunnet endringer underveis
Sustainable investments (SI) can be performed through several different strategies. SI has
developed over the past decades which has led to many new developments, and the field of SI
has burgeoned (Camilleri, 2020). According to Beisenbina et al., (2022), there are four main
strategies for implementing SI: (1) ESG integration, (2) negative screening, (3) shareholder
engagement, and (4) best-in-class screening. The Global Sustainable Investment Alliance
(GSIA) has created an overview of SI assets by strategy (GSIA, 2020). The GSIA is a global
alliance of membership-based organizations dedicated to SI, and it collects data from all its
members. Figure X is created based on the Global Sustainable Investment Report 2020 and
illustrates the distribution percentage of how prominent each strategy is.

Figure x. Distribution Percentage of Each Strategy (Figure master inn her)

The figure shows that ESG integration is clearly the most used strategy within SI. Shareholder
engagement and negative screening are of quite a similar size, with best-in-class making up
only a small portion. All strategies can be adopted by the different parties interested in SI,
making it relevant for individual investors as well as institutional investors (Cunha, Meira, &
Orsato, 2021). In this section, the four main strategies of SI will be presented and examined
further.
ESG integration
ESG integration is the most prominent SI strategy, making up almost half of the SI assets.
According to van Duuren et al. (2016), the inclusion of ESG risks and opportunities by
investors into traditional investment decisions is what defines ESG integration. Incorporating
ESG factors in the investment strategy has for many investment service providers become a
distinct service (Eurosif, 2014). Capucci (2018) further explains that ESG integration seeks to
incorporate a wider range of long-term concerns into the process of investing, rather than only
seeking short-term gains. An analysis performed by Melas et al. (2017) also finds that from
2007 to 2017, the integration of ESG factors generally reduced the risk and contributed to
lower volatility in the investment.
Eurosif (2014) argues that the activities which are performed by asset managers can be
divided into three categories: (1) non-systematic ESG integration, (2) systematic ESG
integration analyses in financial valuations, and (3) mandatory investment constraints that are
based on financial valuations and derived from ESG analyses. Van Duuren (2016) considers
only categories 2 and 3 to comply with the definition of ESG integration.
Using ESG criteria to make SI decisions is one possible way of using the strategy of ESG
integration (Sciarelli, Cosimato, & Landi, 2020). The ESG criteria may help to justify some
investment decisions, and it can play an important role in the path toward a more sustainable
finance and development (Crifo, Durand, & Gond, Encouraging Investors to Enable
Corporate Sustainability Transitions: The case of Responsible Investment in France, 2019).
Examples of ESG criteria related to each of the factors in ESG are presented in Table x.
Table X. Examples of ESG Criteria
Example
Limitation of greenhouse gases
Environment Reduced waste
Use of renewable energy
Ethical supply chain
Social Has fair wages
Policies against sexual misconduct
Diversity on the board of directors
Governance
Has corporate transparency

As Table x shows, there are several ESG criteria. The implementation of ESG criteria is not in
itself an investment strategy, however, it is rather seen as an add-on (Kaiser, 2020). By
incorporating ESG criteria in the SI strategy, ESG integration will be enhanced.
Second most used: Negative/positive screening in two different sections
Negative screening by exclusion is an option to help investors avoid certain companies in
their selection process (Arribas, Espinos-Vaño, Garcia, & Tamosiuniene, 2019). The strategy
of negative screening in SI is longstanding in the world of investment, even though ESG
integration have become the most popular over the last few years. Starr (2008) states that it is
guidelines or rules that make up the “screens” which is used by the investors. Screens can be
detailed or general depending on the demands each investor has for their investment. Capelle-
Blancard et al. (2014) describe four different types of negative screens: sin screens, ethical
screens, social and governance screens, and environmental screens. Many articles present
examples of negative screens, including the articles from Arribas et al. (2019), Starr (2008),
and Capelle-Blancard et al. (2014). In Table X, examples of screens from the articles are
displayed and connected to the different types of negative screening.
Table x. Examples of Negative Screens
Example
Tobacco
Sin Alcohol
Weapons
Animal testing
Ethical Genetic engineering
Abortion
Child labor
Social and
Gender discrimination
Governance
Operations in low-cost countries
Greenhouse gas emission
Environmental Excessive use of resources
Unnecessary traveling

As Table X shows, there are numerous different screens that investors may take into
consideration. It may be difficult to measure how much or how little investors use negative
screening. However, Capelle-Blancard et al. (2014) have described screening intensity as one
of the options for how to measure the use of negative screening. They view the screening
intensity as a quantitative variable, i.e., it is defined by the number of screens that each
investor applies.
Norm-based screening can be seen as a “minimum-standards screening” of negative
screening, i.e., investors screen against the minimum standard (Talan & Sharma, 2019). The
norm-based screening is presumed to have originated in Scandinavia, with investors in other
countries starting to follow the same idea (Hoepner & Schopohl, 2018). Unlike negative
screening which excludes based on different set criteria, norm-based screening is based on
national and international norms, according to (Robinson, Parker, Carey, & Sacks, 2020).
Such norms may come from international organizations like UNICEF or The United Nations.
Examples of what negative screening is
If the strategy of negative screening is chosen …” If this option is chosen, the next problem is
to clearly define and identify”… Negative screening and sustainable portfolio diversification
irresponsible activities by corporations. That is, what activities automatically make a firm
receive the label of “irresponsible” or “unsustainable” company.
 Exclusion og certain sectors
 Fraud
o The Performance of Socially Responsible Funds: Does the Screening Process
Matter?
 Selling or developing certain products
o Socially responsible investment and pro-social change
 Table 3 and Table 2
o Socially responsible investment and pro-social change
Third… Corporate/investor/shareholder engagement/impact
Kjapp intro
Shareholder engagement, also called investor engagement, is the third most used form of SI
strategy. As investors and shareholder are both playing an important role in companies, they
have the opportunity to influence companies’ investment decisions (Sciarelli, Cosimato, &
Landi, 2020). This engagement seeks to start a dialog to enhance the company’s ESG
behavior, which also can lead to a better and more long-lasting relationship between all
involved parties. Kölbel et al. (2020) and Lopatta et al. (2017) both highlights that shareholder
engagement is a highly reliable mechanism for the shareholders and investor seeking impact,
due to the fact that it has been demonstrated empirically.
There are three main mechanisms that shareholders and investors can use to impact the
companies and their SI: engagement, capital allocation, and indirect impacts (Kölbel, Heeb,
Paetzold, & Busch, 2020). This is illustrated in Figure x.

Figure x. Mechanisms of Shareholder Engagement

Shareholder engagement is the first mechanism. As presented earlier, this is a widely used
strategy for SI. The findings from Dyck et al. (2019) show that engagement from shareholders
and investors can lead to a change in company activities. The studies from Dyck et al. (2019),
Dimson et al. (2018), and Hoepner et al. (2016) are all highlighting three specific
determinants which have an influence on the shareholder engagement rate of success: (1) cost
of reform associated with the engagement request, (2) investors having a larger share of the
company, and (3) the level of ESG experience in the company.
Capital allocation is the second of the three mechanisms. Within capital allocation, there are
two ways investors and shareholders may influence companies; incentivizing improvements
and affecting growth (Kölbel, Heeb, Paetzold, & Busch, 2020). When investors allocate their
money based on different criteria, leading to some companies being excluded, the investors
can create incentives that drive the excluded companies to act. With the allocation of money
from investors, they may affect the growth of companies due to the change in the financial
state of the company.
Kölbel et al. (2020) emphasize that in addition to directly impacting the companies,
shareholders and investors can impact them indirectly, and thus incentivize a change in their
SI strategy. Endorsement is one way of indirectly impacting companies. Investors including
them in their sustainability index or portfolio can help to increase the reputation and visibility
of a company. Carlos & Lewis (2018) highlights that this may indirectly motivate its
employees and help them gain customers.

Key concepts and mechanism: Can Sustainable Investing Save the World? Reviewing the
Mechanisms of Investor Impact article. Figure 1
 Engagement
 Capital allocation
o Affect growth
o Incentivizing Improvements
 Indirect impacts
o Stigmatization
o Endorsement
o Benchmarking
o Demonstration
There are three mechanisms that shareholders and investors can use… Create a figure similar
to figure 1 in article

investor engagement, which seeks to create a mutual dialog pointing to change ESG
companies’ behavior, building strong and long-lasting personal relationships Socially
responsible investment strategies 41 and trust #32
Fourth…. Best-in-class strategy
Best-in-class screening makes up only a tiny bit of the implementation of SI strategies,
however some studies have mentioned and described it. Barko et al. (2021) and Sciarelli et al.
(2020) both describes the best-in-class strategy in their studies. The strategy consists of
investing in companies and projects that are leading within the field of ESG. It considers the
companies that are most socially responsible, without having a vast preference of which
sector they operate in. The best-in-class strategy are according to Crifo et al. (2016) also
called “positive screening” and can thus be seen as the opposite of the negative screening
strategy.

best-in-class, which select leading companies on environmental and/or CSR issues #32
Can be related to positive screening #38
… On the opposite side of negative screening…, positive screening (mention this in best-in-
class instead)
“In Europe, the best-in-class approach – where the leading companies with regard to ESG
criteria from all industries are included in the portfolio – is the norm.” The Performance of
Socially Responsible Funds: Does the Screening Process Matter?

Research gaps within this field

Although ESG integration is the most used strategy of sustainable investment and there have
been many articles and studies on the field, there still exists some research gaps that can be
investigated further. Beisenbina et al. (2022) highlights that compared to other types of
financial assets, stocks are where this strategy is applied the most frequently. As a result, there
is a dearth of research in areas like bonds, indices, and others that may significantly enhance
these assets' sustainability impact. Despite negative and norm-based screening being a
longstanding strategy within investment, Hoepner et al. (2018) mentions that there exists a
research gap related to the performance impact of this strategy when sustainability is a factor.
ESG integration (The burgoining field)
Norm-based screening (On the price…)
The examined articles have mainly been written with the use of two different methodologies:
literature review and data gathering. Although all articles have been through a thorough
screening process, there are still some limitations and weaknesses that exist. Some of these
limitations can be linked to their methodology as each of them have different strengths and
weaknesses. Table x shows the articles sorted by their methodology.
Table x. Overview of the Literature’s Methodology (bytte rekkefølge)
Methodology Literature
(GSIA, 2020), (Arribas, Espinos-Vaño, Garcia, & Tamosiuniene,
2019), (Starr, 2008), (Eurosif, 2014), (Kaiser, 2020), (Lopatta,
Jaeschke, & Chen, 2017), (Melas, Nagy, & Kulkarni, 2017),
(Robinson, Parker, Carey, & Sacks, 2020), (Barko, Cremers, &
Data collection Renneboog, 2021), (Hoepner & Schopohl, 2018), (Dyck, Lins, Roth,
& Wagner, 2019), (Hoepner, Oikonomou, Sautner, Starks, & Zhou,
2016), (Carlos & Lewis, 2018), (van Duuren, Plantiga, & Scholtens,
2016), (Cappucci, 2018), (Crifo & Mottis, 2016), (Capelle-Blancard
& Monjon, 2014)
(Talan & Sharma, 2019), (Cunha, Meira, & Orsato, 2021),
(Camilleri, 2020), (Sciarelli, Cosimato, & Landi, 2020), (Beisenbina,
Literature review Fabregat-Aibar, Barberá-Mariné, & Sorrosal-Forradellas, 2022),
(Kölbel, Heeb, Paetzold, & Busch, 2020), (Crifo, Durand, & Gond,
2019), (Dimson, Karakas, & Li, 2018)

The articles that have not used data collection as their methodology have used the research
method of literature review. Although reading literature and using the information can be seen
as a way of collecting data for research, there is a difference as it does not use, e.g., databases,
or surveys. Beisenbinha et al. (2022), Cunha et al. (2021), and Dimson et al. (2018) all
performs a systematic literature review. Beisenbinha et al. (2022) point out that a weakness of
their article is that they only used one database as a source for collecting articles. As well as
highlighting that in literature reviews the definition of categories and the inclusion of articles
is decided by the authors and can thus be discussed.
Data collection is the methodology that most literature adopts. The data that these articles
have gathered has been from various places, like websites, ESG databases, and surveys.
Capucci (2018), van Duuren et al. (2016), and Crifo & Mottis (2016) all use surveys as their
way of collecting data. This may be a great way of getting direct feedback on the topic from
the participants in the surveys. However, Crifo & Mottis (2016) highlights the limitation of
managing to collect enough responses from the surveys which could weaken the research.
Extracting data from databases and different reports is the methodology chosen by Melas et
al. (2017), Barko et al. (2021), and others. A weakness of these articles may be that they do
not obtain the data themselves. Thus, it may be difficult to verify the extracted data.
Other: surveys, simulation, modeling
Data gathering: websites, annual reports, databases, ESG databases (find some exampes).
Get surveys inn under data gathering.

Conclusion
After researching the different strategies for sustainable investment, it emerges that ESG
integration, negative screening, and shareholder engagement are the three main strategies. The
most prominent strategy, ESG integration, includes ESG risks and opportunities in traditional
investment decisions. While negative screening is an option to help investors avoid certain
companies in their selection process, and shareholder engagement is a way to influence
companies’ investment decisions. Although the existing literature is broad and covers all the
main strategies, there still exists some gaps and thus a potential for further research, especially
in the areas of bonds and indices.

Shareholder engagement, also called investor engagement, is the third most used form of SI
strategy. As investors and shareholder are both playing an important role in companies, they
have the opportunity to influence companies’ investment decisions (Sciarelli, Cosimato, &
Landi, 2020). This engagement seeks to start a dialog to enhance the company’s ESG
behavior, which also can lead to a better and more long-lasting relationship between all
involved parties. Kölbel et al. (2020) and Lopatta et al. (2017) both highlights that shareholder
engagement is a highly reliable mechanism for the shareholders and investor seeking impact,
due to the fact that it has been demonstrated empirically.
There are three main mechanisms that shareholders and investors can use to impact the
companies and their SI: engagement, capital allocation, and indirect impacts (Kölbel, Heeb,
Paetzold, & Busch, 2020). This is illustrated in Figure x

Although ESG integration is the most used strategy of sustainable investment and there have
been many articles and studies on the field, there still exists some research gaps that can be
investigated further. Beisenbina et al. (2022) highlights that compared to other types of
financial assets, stocks are where this strategy is applied the most frequently. As a result, there
is a dearth of research in areas like bonds, indices, and others that may significantly enhance
these assets' sustainability impact. Despite negative and norm-based screening being a
longstanding strategy within investment, Hoepner et al. (2018) mentions that there exists a
research gap related to the performance impact of this strategy when sustainability is a factor.

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