Sustainable finance supports the establishment of companies’ ESG practices, but the institutionalization of new practices has not reached its full potential yet. This is evident from Jukka Honkaniemi’s new DBA dissertation.
Jukka Honkaniemi’s DBA dissertation examines the integration of sustainability issues into business practices in the financial sector and small and medium-sized enterprises (SMEs) in three essays. The first of these examines how ESG is integrated into the equity analysis of large companies (OMXS-30 companies) in a Swedish bank. ESG – the concept of environmental and social responsibility and good governance practices – is used especially by businesses in measuring and reporting sustainability. In the bank’s pilot project, experienced analysts calculated the impact of ESG on the share price transparently in a way that had never been done before.
“Two-thirds of Sweden’s 30 largest listed companies would have experienced a reduction in the share price recommendation, while one-third would have seen their share price recommendation increase if ESG analyses had been fully taken into account,” says Honkaniemi.
According to Honkaniemi, institutional investors are in a unique position: they can drive market development to a new level. If brokers and sell-side analysts are given the right incentives, they can meet this demand from investors.
The second essay of the DBA dissertation is a systematic literature review that analyzed what existing research said about the relationship between ESG and financial performance in the context of SMEs. SMEs represent over 99% of businesses and account for over half of GDP, employment, and the environmental impact in the EU. The green and sustainability transitions cannot be achieved without having SMEs onboard.
One of the findings was that only 36 of the 1,600 scientific articles reviewed and published by the end of 2020 dealt with SMEs. Only five studies covered European SMEs; no research was found on Finnish SMEs with selected keywords.
“In large companies, the most significant ESG issues are industry specific. SMEs have different characteristics, and in addition to the industry, cultural and local context-specific ESG factors can also be financially material. Climate change or the role of owners had hardly been examined in the studies,” Honkaniemi describes.
The third part of the dissertation is a case study of a Finnish technology SME. The interviews and examination of other material focused on examining sustainability through a review of the company’s strategic strengths and weaknesses. The researched company focused on its economically material stakeholders and anticipated future demands from them in its strategic planning. In addition, responsibility issues were strongly linked to the company’s value base, which in turn reflected the owner’s influence.
“The research revealed that some customers had asked sustainability-related questions from the case-study company, but this had not yet impacted the actual business negotiations. Most customers, banks, or suppliers had not raised the issue of ESG, but in their planning, the company anticipated that this would happen.”
Honkaniemi’s research is the eleventh doctoral dissertation to be completed from Aalto EE’s DBA programme. The work has been supervised by Professor Hanna Silvola from Hanken University and University Lecturer Hedon Blakaj from Aalto University. DBA has the same premise as other doctoral dissertations: to produce scientifically reliably obtained and valid information. The DBA is based on working life and has the objective of contributing to business practices.
Honkaniemi works in his own consultancy company, which specialises in promoting sustainable business in corpanies and the financial sector. Before running his own firm, he had a long career as an executive in international banks.
“The dissertation has a huge significance for my work, it broadens and deepens my knowledge. The company I founded consults and helps financial institutions and companies in marshaling ESG and having new practices implemented in their organizations. The goal of my second company is to provide banks and financiers with accurate information on the ESG risks of SMEs and to involve SMEs in the green transition as widely as possible,” Honkaniemi says.
Aalto University School of Business will examine Jukka Honkaniemi’s DBA dissertation “Money Matters: Essays on Sustainable Finance and the Institutionalization of ESG” on Tuesday 6.6.2023 at Aalto University. The dissertation will be held in English.
Professor Sami Vähämaa, University of Vaasa is the opponent and Academic Director Mikko Laukkanen, Aalto EE, is the custos.
