Magdalenakyrkan i Bålsta en solig dag. Svenska kyrkans flagga vajar utanför.
Foto: Gustaf Hellsing /Ikon

Sustainable Investments 2021

Performance in 2021 including bank and management fees amounted to SEK 1,960 million (SEK 403 million the previous year). Returns for the overall portfolio amounted to 19.8% (4.2%). This is 2.9 percentage points lower than our benchmark index but 12.8 percentage points higher than the real rate of return target.

This is the eleventh year in a row that the Church of Sweden has published a report on its work with sustainability issues in asset management at the national level. This report, as previously, has been produced by the financial staff after consultation with the Central Board Asset Management Council. Asset management in dioceses, parishes and congregations are not included in this report.

Sustainable investment activities are conducted throughout the Church of Sweden.

The year in brief

2021 was characterized by a high level of risk-taking in the financial markets and a vigorous recovery in the economy after the decline in GDP during 2020. The increase in profits among companies was impressive and were well above the forecasts made at the beginning of the year. This increase in profits together with continued support packages, expansionary monetary policy from central banks and rising valuation multiples resulted in significant positive development among the world's stock exchanges.

Asset management results in Swedish Krona were the strongest since the turn of the millennium. The result was SEK 1,960 million, corresponding to a return of 19.8%. Asset management has generated a positive return every year for the past ten years and has exceeded the long-term return target set in 2000.

During 2021 the Covid-19 pandemic continued and new mutations of the virus spread throughout the world. A great portion of the year was characterized by extensive spreading of the virus and recurring extensions in closures and restrictions.

The COP 26 climate summit took place in Glasgow. The nations adopted a climate pact in Glasgow, which aims to make the 2020s a decade of climate action and climate support. This decision package consists of a number of agreed points, including strengthened efforts to build resilience to climate change, to reduce greenhouse gas emissions and provide the necessary funding for both. The nations reaffirmed their commitment to fulfil the promise of providing $100 billion annually from developed countries to developing countries. And they jointly agreed to work to reduce the gap between existing emission reduction plans and what is needed to reduce emissions, so that the increase in global average temperature can be limited to 1.5 degrees. For the first time, nations are being called upon to phase out coal power and inefficient subsidies for fossil fuels. Read more about how we work with the climate issue in our investments further on in this report.

At the time of writing (March 2022), the war in Ukraine is a fact. The church bells in Uppsala Cathedral are ringing for peace. Unrest is high in the financial market and another black swan has appeared in a short time.

New investments

During 2021 we invested in a further two global equity funds. They are managed by Ownership Capital and Mirova and the purpose was to reduce the concentration risk in relation to our largest manager of global equities, Generation Investment Management. At the end of 2021, we also joined a new Swedish equity fund, Odin Sweden. It is an actively managed fund with a high exposure to small and medium-sized companies. 

Ett demonstrationståg för klimatet en regnig höstdag.
Foto: Mikael Stjernberg

Commission, management model and follow-up

The commission given to us by the Central Board of the Church of Sweden expressly focuses on the long-term performance of asset management for the Church of Sweden at the national level.  The overall target return is 3% 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 capital, i.e. division among asset types, as well as choice of fund manager and follow-up.

The rate of return target in real terms that was set in 2000 at 6% per annum, was then lowered to 4% per annum and has since 2010 been at 3% per annum.

Read more about our asset management.

Financial development in the long-term

Asset Management over 10 years

From a ten-year perspective, our portfolio is robust. Between the years 2011-2021, the cumulative return was 172.9%, corresponding to an average return of 10.6% per annum. The return target for the same period was 50.0%, corresponding to 4.1% per annum (see Figure 1 below).

Figure 1 - Actual return, target return and inflation (KPI) 2011-2021

Asset management has exceeded the return target nine of the last ten years. The outcome for individual years has, however, varied greatly, which is shown in the bar chart (see Figure 2 below).

Figure 2 - Actual return, target return and benchmark index 2012-2021

Asset Management since the turn of the millennium: a 22-year period

Part of the agreement made between the Church and the national government in the 1990s was to transfer the capital previously managed by the Legal, Financial and Administrative Services Agency (Kammarkollegiet) from the state to the Church of Sweden in connection with the coming change in relations in 2000.

Thanks to the portfolio’s strong results in recent years, returns have now also caught up with and surpassed the return target for the same period. The cumulative return at the turn of the year was 216.1%, while the target return was 183.6%, corresponding to an annual return of 5.4% since the turn of the millennium. In real terms, it has yielded an annual return of 4.0% since 2000. The very weak stock markets in 2001, 2002 and 2008 are the primary reason behind the weak return during the first decade in the 21st century (see Figure 3 below).

Figure 3 - Accumulated return, target return (accumulated) and inflation (accumulated) (KPI) 2011-2021

Result, return and assets 2021

The 2021 result for the Church of Sweden's asset management at the national level amounted to SEK 1,960 million. This corresponds to a return of 19.8% (benchmark index 16.9%).

For the past nine out of ten years, returns have exceeded the weighted reference portfolio’s benchmark index. In 2021, asset management out-performed the index by 2.9 percentage points.

The main reason for this development in 2021 is the continued overweight we had in global equities. This asset class experienced very strong development during the year. 

The market value of the invested assets as of December 31, 2021 amounted to SEK 11,519 million (previous year SEK 9,909 million). In December, a withdrawal of SEK 350 million was made from asset management to liquidity management at the Church of Sweden's national level.

Allocation based upon a strategic reference portfolio

To create pre-requisites 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 ten-year time horizon.

Depending on how the different markets develop, the distribution, i.e. allocation, among the asset classes in our portfolio, is constantly changing.

The allocation between the asset classes is shown in Figure 4; Return per asset class, Table 1 and the Largest shareholdings in Table 2.

Equity management

Equity management contributed a net SEK 1,655 million. Ethos' Equity Fund, which is managed by SEB, had the highest return among Swedish equities, with 38.1% (index 39.3%). Generation IM Global Equity Fund had the highest return among global equities and emerging markets with 32.8% (index 34.0%). 

As a group, the asset managers handling global equities and emerging markets performed considered better than their respective benchmark indices (2.4 and 2.3 percentage points, respectively). Emerging market asset managers, Stewart Investors and Generation, performed better as a group than their benchmark index (6.2 percentage points better).

Fixed income investments

For the first time since the turn of the millennium, fixed income management yielded a negative return. Rising interest rates were the main reason why Swedish fixed-income securities fell by 0.8% during the year. The index fell by 1.0%, which meant that the asset managers as a group achieved a return that was 0.2 percentage points higher than the index.

Corporate bonds yielded a positive return of 1.5% during the year, while the index fell 0.6%. The asset manager thus achieved a return that was 2.1 percentage points higher than the index. 

Real estate

The  real estate asset class contributed with a 8.8% return (index 7.0%). However, the return is largely based on annual external valuations of the holdings in the various real estate funds in which we have invested. These valuations are made annually but are often determined well into the first quarter, which is why there is a lag of one year in valuation development. The reported return for 2021 therefore includes the valuation as of 31 December 2020.

Alternative investments

Alternative investments yielded a return of 31.7%, which is significantly higher than the absolute return index of the KPI + 3% that we use for properties and alternative investments. As the inflation (CPI) ended at 3.9% for 2021, the index was 7.0%. Significant increases in value within our unlisted (not listed on stock market) investments contributed to the strong return. As previously stated, however, the current valuation of primarily equity-related investments, and to a large extent also illiquid assets, can often be associated with a tremendous degree of uncertainty. In the vast majority of our holdings within this asset class, one has to wait until maturity before the result can be determined.

Figure 4 - Division between asset classes 31 December 2021

Table 1 -  Result and return 2021 per asset class and a 5-year average return overview

Table 2 - Our largest holdings in equities december 2021

Portfolio sustainability 2021: a selection

How do we know that the companies that we invest in incorporate sustainability? We will never achieve full insight into this, but with the help of external data providers we can conduct a screening of the portfolio and get an idea of ​​how well the companies work with sustainability. If a company violates international conventions and other frameworks for people, the environment and anti-corruption, we receive reports about this. And the managers we hire measure the sustainability of their funds in different ways, which we can then review. The acronym  ESG, Environmental, Social and Governance is often spoken about, i.e. environmental and social aspects as well as corporate governance. Or simply: corporate responsibility. 

The Church of Sweden's portfolio receives high ratings and meets the requirements of the Paris Agreement

Our portfolio also gets high marks for sustainability this year. This applies both when looking at what goods and services the companies manufacture, and what the manufacturing process itself looks like, i.e. working conditions in its own or suppliers' factories, emissions to air, land and water, and so on. The companies are rarely involved in serious incidents and other violations of international frameworks. Of course, there are problems, not least the Swedish large companies that have recently ended up in bad weather as a result of revealed cases of corruption. In such cases, we act individually or together with other investors. But in general, this happens extremely rarely in our portfolio companies, which is partly due to the fact that many belong to industries with a low risk of serious violations. But they have also often done a better job of preventing risks in their operations, not least in the supply chain that is often found in Asia. Most incidents regard work environment problems, digital surveillance and lack of trade union rights. We have three such cases that were received in 2021 and have passed them on to the relevant asset managers.

The climate profile in the portfolio is also clearly and in line with the goal of global warming of less than two degrees compared to pre-industrial times, which the world agreed on in 2015 through the Paris Agreement. The Paris Agreement aims to limit global warming to a maximum of 1.5 degrees on average at a global level, a goal that we are unfortunately about to violate. According to the latest report from the Intergovernmental Panel on Climate Change (IPCC), which was released on 28 February 2022, we are currently moving towards an increase of three degrees warming.

New fund meets many of the global goals

The Church of Sweden makes extensive investments in micro-financing.  It is a way to achieve good financial returns at a relatively low level of risk.  This asset class does not covariate with other asset classes, such as the stock exchanges, and at the same time creates a remarkably large societal benefit for both people and the environment. 

Since the start in 2018, one of the microfinance funds we invest in, Impact Opportunity, which is managed by SEB, has provided 80 institutions in 40 developing countries with capital in local currencies corresponding to almost one billion Swedish kronor. A total of about 62,000 borrowers have been reached though these funds, which financed primarily small businesses, about 50,000, with small loans so that they can build up and develop their businesses. Of these small business customers, just over 12,000 are farmers who receive the opportunity, e.g. to switch to more sustainable farming methods, buy a tractor or expand their animal husbandry. 

The fund has also invested in Sri Lanka's first green bond, which is issued with the aim of slowing down the loss of biodiversity and creating protection against climate change. The bond is aimed at farmers, among other things, to stimulate them to use several local seed varieties, which increases biodiversity. Agriculture uses large amounts of water, and with the bond, farmers have the opportunity to install drip technology where each crop gets exactly as much water as it needs, which saves huge amounts of water. 

Solar cells are of course an element of the fund, as the technology is both cheap and easy to install in the smallest dwelling and offers many benefits. With a solar cell, the children can have light to do homework by, and mobile phones can be charged. The electricity from the solar cells replaces the expensive kerosene, which is also flammable and creates respiratory problems due to the soot particles it contains when burned. 

The fund also finances student loans and housing loans to people with low incomes, so that they can climb out of the poverty trap. 

In total, the fund contributes to financing several of the UN’s 17 global goals for sustainable development.

The Church of Sweden as a responsible investor

The Church of Sweden wants to be a leader within sustainable development. The Church of Sweden's portfolio has high ratings and meets the requirements of the Paris Agreement. 

Active asset management

The number of company-related securities in the Church of Sweden's portfolio, such as shares and corporate bonds, amounts to around 400, which is a comparatively low figure. This is because we only employ active management, where the managers choose individual companies that they follow closely. The opposite, passive management, is much more common, and in these cases, the asset manager constructs a portfolio that reflects its benchmark index. This often leads to having thousands of companies in the total portfolio. It goes without saying that it is then not possible to follow every single company. The process becomes more automated and the price tag is therefore significantly lower.

However, we believe in active management because we thereby avoid being owners of companies that do not meet standards either financially or in terms of sustainability. Our finance policy screens out about half of the companies on a global index for sustainability reasons such as the link to weapons, fossil energy and tobacco. On the other hand, we see the point in trying to influence not only our own holdings, but also entire industries, value chains and norms. Nothing is stronger than its weakest link. For example, as long as we have an ongoing climate crisis in the world, we cannot ignore the fact that other actors are still financing new investments in fossil energy. We can then use the tools that are available in addition to creating a sustainable portfolio, namely various forms of influence.

Why influence?

Listed shares are traded on a secondary market, the stock exchange, where companies do not notice who is buying and selling their shares. New capital is only received by companies when there is a new share issue, i.e. when they issue new shares. Investors also buy corporate bonds, which is another way for companies to raise new capital. In other words, we realize that our never-before-so-sustainable equity portfolio does not in itself affect the world. However, companies do listen to their owners. That is why we attach great importance to communicating, engaging in dialogue and driving change at various levels. 

The Church of Sweden, like most capital owners and asset managers who work with sustainability, is a signatory to the six principles that PRI (Principles for Responsible Investment) developed in 2006. This means that we include sustainability issues both in our own analysis, and in our work, to influence the companies and other actors in the value chain, such as the managers we hire or the legislators and other decision-makers who set the framework for our work.  For this reason we are active in several networks for investors where we together drive change towards a more sustainable financial industry. 

We want to influence change

In accordance with the above, the Church of Sweden has a strategy for exerting influence at various levels. At the core of this strategy are the asset managers we have chosen. Firstly, we address various issues regarding sustainable value creation in the portfolio with them and secondly, discuss the actual portfolio holdings. The next level is to look at issues that companies need to act on in the near future, such as climate, biodiversity and human rights. Then we can get involved in various initiatives that drive these issues forward among the listed companies that have the greatest negative impact. The more overarching part of the strategy is to try to influence legislators to create a more effective game plan. With laws and regulations that promote sustainable businesses and slow down or stop businesses that destroy or risk our future, it will be much easier to run companies in a sustainable way, and then we who finance the companies can more easily do the right thing.


En elbil står och laddar från en laddstolpe under en rönn.
Foto: Kristina Kraft /Ikon

Responsible owner in the climate issue

The planet and its inhabitants have a fever

The year of this report, 2021, was also marked by the pandemic and its impact on human health, the economy and the basic functions of society, such as healthcare, education and transport. Restrictions to flatten the infection curve were reintroduced in many countries so as not to overburden healthcare. At the same time, the temperature of the entire planet was on average 1.1° C higher than during pre-industrial times. This is the seventh year in a row that the planet's "fever state" has been above 1.0° C.[1] According to researchers, with current climate commitments in the world, we are on the way to up to 3.0° C warming by 2100, within a generation, which would mean disaster for life on earth and human civilization. And we have ten years to stop the warming from reaching a permanent greenhouse-like state.[2] 

The planet is warming much more around the poles than at the equator, so in Sweden the average temperature has already increased by 1.7° C according to SMHI. In some northern parts of the country, warming is above 2.1° C.[3]  It has consequences for flora and fauna, and for people who are dependent on functioning ecosystems, for example in the tourism industry, the reindeer industry and the forest industry.

Swedish companies are changing with the support of the state

Sweden has reduced its territorial emissions by about 35% since 1990. A fifth of the Swedes surveyed in a 2021 survey knew that emissions had decreased, but only 7% were aware of approximately how much they had decreased. As many as 40% believed that emissions had increased. 

The Church of Sweden is participating as an investor in a new research project, Fairtrans, which started in 2021 and is funded by Mistra (Environmental Strategy Foundation). In one of the sub-projects, the various actors in civil society are invited to discuss how the transformation into a fossil-free society can be done in a way that can be accepted by all. A smooth climate change benefits both the business community and society at large. Swedish companies are at the forefront and can show the way for the rest of the world and at the same time gain a competitive advantage. A shining example is SSAB, which in 2021 sold the first product in the world made of fossil-free steel, with partial government funding. The Volvo Group, in which the Church of Sweden invests, was their first customer.[5] SSAB is also in our portfolio from time to time.

Dialogues with banks about the climate to influence investment

At the same time, our neighbouring country Norway, has just granted additional permits for oil extraction at 53 locations off the Norwegian coast, some of which are in the Arctic.[6] In the spring of 2021, the Church of Sweden held talks with some of the banks that we are both customers of and invested in, to discuss their lending to companies that extract raw materials for fossil energy, including in the Arctic. However, we did not receive any clear answers to our questions about when these contracts would be phased out. Of course, we take a serious view that the financing of new fossil energy does not have a clear end date for these banks, and this risks the credibility of their climate work. 

The world's largest lender for fossil energy is JP Morgan Chase, followed by three other US banks.[7] JP Morgan Chase is also the UN house bank. The Church of Sweden is part of the World Council of Churches and we are met with respect around the world for our climate strategy in asset management. We were therefore invited to talk to the UN about their responsibility to do as they say and use their influence. We explained that the UN also has the opportunity to make its house bank understand that it needs to take action to reduce its financing of fossil energy if the bank wants to continue to have the UN's trust and mission. It is a daunting task to restructure all industries within a decade, but that is what the Paris Agreement implies and underlies the condition of our future civilization. Large financiers, therefore, need strategies to meet the goals of the Paris Agreement. 


The tone from the top that inspires hope - four voices 2021

Foto: Simon Chambers/Act Alliance

In general, the Church of Sweden follows and participates in every climate summit as one of several important actors in civil society. The 2021 meeting, COP26, took place in Glasgow, in November. Churches and organizations around the world submitted more than 150,000 names in a Climate Justice petition. From Sweden, more than 13,000 raised their voices for ambitious climate commitments that take the climate emergency seriously.[8] Antje Jackelén, the archbishop, spoke at an interfaith meeting about the responsibility of all spiritual leaders, about the importance of a fair climate change and that we listen to science.[9]

Man i slips som håller tal
Mark Carney, FN:s särskilda sändebud för klimat och finans

The important role of the financial industry in climate change became even clearer when Mark Carney, former head of the Bank of England and now the UN Special Envoy for Climate and Finance, spoke at COP26. "The core message today is that the money is there, the money is there for the transition, and it's not blah blah blah", as Greta Thunberg usually claims. So, there is money for this transition, and it's not just talk.[10]

Internationella energimyndigheten

In the spring, the International Energy Agency, IEA, presented its report outlining the path to a fossil-free world in 2050. According to the IEA, among other things, all new investments in fossil energy must stop now, and fossil-powered cars stop being sold after 2035. All electricity in the world is renewable or reaches net zero emissions by 2040.[11] Rapidly replacing fossil energy with renewables can create millions of jobs, a stronger energy industry and higher growth in the world, according to the report.

Gråhårig man i en FN-talarstol.
António Guterres, FNs generalsekreterare Foto: Dean Calma / IAEA

UN Secretary-General António Guterres is also making his voice heard after reading the IPCC's latest report from August. The International Climate Panel's report is a red warning flag for humanity, says Guterres. If we are to cope with the climate crisis, he believes that we must restructure the energy sector as soon as possible, not build new coal power plants in the future but instead phase out existing coal heating, switch over subsidies from fossil fuels to renewable energy and quadruple solar and wind power by 2030. “Solutions are clear. If we respond to this crisis with solidarity and courage, we can all have greener, more inclusive and strong economies, cleaner air and better health.”[12]

Investors in the Global Goals in Agenda 2030

Since 2016, we have been participating in Swedish Investors for Sustainable Development (SISD), which  aims  to promote investments within the 17 global goals for sustainable development in Agenda 2030 (Sustainable Development Goals) adopted by world leaders in 2015. In this forum, we lead the work in Sanitation and Clean Water (goal 6) and Sustainable Cities (goal 11). SISD brings together about twenty of Sweden's largest investors. In 2021, for example, we held talks with a number of municipalities that have a great need to expand and improve their water infrastructure, and investigated whether we could be helpful in their financing. 

SISD has a global counterpart, GISD, which, among other things, has produced a report with 64 recommendations to decision-makers on what is required for the financial industry to be able to shoulder the key role it has in climate change and Agenda 2030. The Church of Sweden is part of SISD's reference group for GISD.[13] 

“We cannot deliver on the Sustainable Development Goals (SDGs) or Paris Agreement solely through new ‘green’ investments; we need to ensure that the whole financial system and the entire economy undergo a sweeping transition to a more sustainable future.”  “A new collaborative mechanism is notably needed to help governments put financial flows on a sustainable trajectory and produce national capital-raising plans that are internationally coordinated and investible at scale.” (pg. 6 in GISD’s report).

New investor forum to combat corruption

Corruption damages both companies’ profitability and investors' returns. In addition, corruption spreads like a wet blanket over all work with the environment and working conditions in the companies. The Church of Sweden therefore started an investor group within Transparency International Sweden in the autumn of 2021, in response to the fact that we as investors need a better understanding of how companies work against corruption and how this work can be improved. Transparency International is a global organization that disseminates knowledge on how to combat corruption in all its forms. Every year they publish an index in which they rank the countries of the world. Sweden as a nation is among the best, but we have had several companies receiving criticism in recent years. The investor group within Transparency International Sweden calls itself the Investors Integrity Forum and addresses itself primarily to Swedish companies, in order to both provide support and to move efforts forward so that the companies work more thoroughly to reduce the risks of corruption.
Read more here: 

New requirements for review of human rights and the environment

The EU has listened to the financial industry and developed its green taxonomy, or classification system, for what can be called green on scientific grounds. Social issues have also been addressed at EU level, but are more difficult to measure. As investors, we have long seen that human rights in the supply chain are a weak link in the companies. However, legislation is in the pipeline from the EU, with binding requirements for larger companies to conduct a due diligence of their risks of violating human rights and the environment. In 2021, the Church of Sweden, together with a group of other Swedish investors, within the Sustainable Value Creation network, organized three seminars on how companies can best work with human rights throughout their value chain, not least at the supplier level. To further this end, the group hired the expert organization Shift, which is a leader in these issues.[14]



[2] (Signs of changes that may be beyond our control)

[3] (Significant warming in northern and eastern Sweden)

[4] (Knowledge of reduction in Swedish emissions)

[5] (The first fossil-free steel ready for delivery)

[6] (New petroleum production licenses)


[8] (Church of Sweden, Act, Climate justice)

[9] (News, top meeting Glasgow)







About sustainable investments 

All activities of the Church of Sweden are permeated by long-term thinking and sustainable development for humans and the environment. Therefore, we want our investments to be compatible with these values. How this is to be done is expressed in the Church of Sweden's financial policy, which the Central Board of the Church of Sweden decides on, and the associated placement instructions for ethics and sustainability, which are to be read in conjunction with the policy. This policy is based upon two fundamental values: the concept of stewardship and the principle of human dignity.

Download our financial policy.

Find out more about our sustainable investments here   

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