A handshake away: How institutional investors manage the social and environmental impact of their investment portfolios

This dissertation examines how institutional investors manage the environmental and social impacts of their investment portfolios, using four research methods. It demonstrates that multidisciplinary research can generate novel insights, contributing both to academic debate and to investment practice.
A systematic literature review shows that, while measuring impact receives considerable attention in the academic literature, there is relatively little research on how institutional investors integrate impact into their investment processes. Measuring impact to demonstrate accountability differs from measuring to improve outcomes. Measuring to demonstrate accountability mainly relates to legitimacy and stakeholder expectations, whereas measuring to improve relates to understanding impact and integrating it into decision-making. The review highlights the need for research on operationalising impact throughout the investment process.
The conceptual study introduces the Integrated Strategic Asset Allocation (SAA) framework, which enables investors to consider not only risk and return, but also long-term societal and environmental transitions and the impact of their investments. A key insight is that investment impact is partly determined by investors themselves, as their decisions can accelerate or slow down societal transitions. Propositions derived from this framework inform future empirical research.
The grounded theory study examines the cognitive frames interactions in integrating sustainability in investment practice. Based on interviews and observations, three cognitive frames are identified: the business case frame, the paradoxical frame, and the sustainability case frame. These frames influence how professionals interpret and act on sustainability. Differences in frames explain why discussions about sustainable investing are often polarized. At the same time, in collaborating the frames can be complementary: combining their strengths can help investors more effectively advance sustainable investment practices. The framework presented in this chapter provides a basis for understanding and strengthening these collaborations.
Quantitative research investigates the relationship between investment returns and contributions to the United Nations Sustainable Development Goals (SDGs). The main results show a negative relation between excess returns and SDG contributions of –0.62% to –0.82% on an annual basis. The results furthermore indicate that the relation is stronger for negative SDG contributions than for positive SDG contributions. While designed to measure positive SDG contributions, investors in practice focus more on negative contributions. Negative SDG contributions appear to signal companies’ unpreparedness for societal transitions, effectively functioning as a risk indicator.
The final chapter synthesizes the findings and provides guidance for future research and practice. For measuring impact, it is important to distinguish between company impact and investor impact, and to evaluate company impacts against absolute planetary and social boundaries. For managing impact, investors can benefit from decision-making tools that explicitly integrate impact, the use of transition pathways, and the application of the three cognitive frames. Together, these insights provide a practical and theoretical foundation for better measuring and managing the impacts of institutional investments.