Strategic sustainable investing

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Strategic Sustainable Investing (SSI) is an investment approach that rewards companies leading the shift toward sustainability. It uses a science-based definition of sustainability and a backcasting method: imagine a sustainable future and plan actions to reach it. It was developed by researchers at the Blekinge Institute of Technology in Sweden.

SSI aims for competitive, risk-adjusted returns while investing in firms that actively pursue sustainability. It combines traditional financial metrics with environmental, social, and governance (ESG) factors and strategic analysis to guide decisions.

Key features:
- Lower sustainability risk
- Science-based definition of sustainability
- Driven by progress toward sustainability
- Integrates financial results with ESG and strategy analysis

How it works:
Investors allocate capital to leaders who are moving away from unsustainable practices, creating incentives for others to follow. Sustainability progress is reported in CSR and other reports, and is also reflected in financial statements, making the impact on profits clearer. The process creates a positive feedback loop: better investments reinforce more sustainable action.

Who uses SSI:
Institutional investors with a long-term view, such as mutual funds and pension funds.

Foundations:
SSI builds on strategic sustainable development ideas linked to The Natural Step. It is related to socially responsible investing (SRI) but aims to address gaps in identifying true leaders and linking sustainability actions to returns.

SSI analysis tool: two main parts
1) Sectoral Emerging Sustainability Issue (ESI) chart — identifies which sustainability issues will matter for a sector, using Principles of Sustainability to judge short-, medium-, and long-term risks. Issues are prioritized with colors: red (very high), orange (high), yellow (medium), green (low). The chart is specific to the sector and location.
2) Strategy analysis — evaluates a company’s actions related to the ESI. It looks at public commitments and initiatives, how the core business relates to the issue, and whether the company is “walking the talk.”

Additional elements:
- Strategic Plan: outlines goals, initiatives, partnerships, and how the company’s core business relates to the ESI.
- Strategy Actions: reviews recent actions to see if they deliver ROI, move the company in the right direction, and serve as a versatile platform.
- Strategy Analysis Graph: shows the company’s planned path, progress, and relevant regulations, illustrating future risk exposure.
- Assurance assessment: provides an overall check on data reliability, including third-party verification if available.