Background: The importance of sustainability is increasingly growing, which is reflected in all areas of society. The Swedish Pensions Agency that is responsible for administering and distributing pensions, has contributed by making sustainable and ethical choices easier for investors with their sustainability certification M/E. Despite this, there is potential for improvement as not all investors choose to be socially responsible. In order to increase the number of investors that invest in SRI, it is important to find the factors that affect the holdings in SRI funds.

Purpose: The purpose of the report is to determine whether the individuals that invest in M/E premium pension funds are mainly driven by financial performance of the fund, or if there are other variables that influence the decisions of these investors. In order to pursue this purpose, a hypothesis is formulated; that sustainable investors do not only take performance into consideration when choosing pension funds.

Method: To achieve the purpose of the report, a quantitative research method has been applied with an analytic and explorative research design. With a positivist philosophy, the results have been interpreted together with a deductive advance. The secondary data is collected from official registry data provided by the statistical department of the Swedish Pensions Agency, and is thereafter processed further by the authors through panel data and a fixed effects model.

Conclusion: The study finds that sustainable investors tend to take past performance into consideration and choose their premium pension funds accordingly. Despite the fact that past performance is the most important factor, variables such as risk and fees are significant for investors when choosing their investments as well.