Information about new rules regarding client sustainability preferences
When you as a client receive investment advice on how you should invest your capital the investment advisor is required to collect relevant information from you to be able to evaluate whether and if so an investment product is suitable for you to invest in (so called suitability assessment). Now new EU-rules apply which require the investment advisor in the suitability assessment to consider whether, and if so how, you would like to make sustainable investments.
As the EU-regulation is still under development there may currently be situations where there is not enough information to connect a certain investment product to your sustainability preferences. In time, as more information is available, this will not be an issue. The investment advisor will give further information on what impact this has on products included in your investment advice.
What are sustainability preferences?
Principal Adverse Impact (PAI)PAI is about how actions taken by a company will impact the environment. Actions may result in e.g. carbon emissions, impact on the biological diversity or being in breach of OECD’s guidelines for multinational enterprises. If you would like to avoid PAI you can ask your investment advisor to take this into account when providing investment advice.
Currently it is not mandatory for all financial advisors and manufacturers of investment products to include information on PAI and how these have been managed for all investment products, i.e. such information may not be available in the market.
Sustainable investments according to the Sustainable Finance Disclosure Regulation (SFDR)The SFDR divides investment products based on whether they have sustainable investments as its objective (so called article 9 products), or whether they promote environmental or social characteristics (so called article 8 products). Manufacturers of investment products shall inform of how these characteristics and sustainable objectives will be achieved. Article 9 products may in general only invest in companies that are considered sustainable, while article 8 products may promote sustainability in other ways, e.g. through exclusion or advocacy work. Article 8 products may have differing levels of ambition in their work on sustainability.
It is the manufacturer which, based on the definition on what constitutes a sustainable investment in SFDR, sets the criteria for what should be considered as sustainable and not. The manufacturer shall inform to what degree the investment product includes sustainable investments, according to its own criteria. In the assessment of a company, the whole company will be classified as sustainable even if only part of it contributes to sustainable objectives. As demarcations of sustainable investments may differ among different investment products it may not be possible to make a fair comparison.
Environmentally sustainable investments according to the Taxonomy Regulation (EU-taxonomy)The manufacturer of investment products shall inform of to what degree the product includes environmentally sustainable investments according to the EU-taxonomy. In the EU-taxonomy it is defined whether a company’s economic activities may be assessed as environmentally sustainable. By stating to what degree the investments should include taxonomy aligned activities you as a customer can direct your capital towards more environmentally sustainable activities. The EU-taxonomy is only partially in place which means that the degree of a financial product’s alignment to the taxonomy will initially be limited. In time this alignment is expected to increase.