Sustainable Finance Disclosure Regulation
On 10 March 2021, a new EU regulation for sustainable investments came into force. The aim of the Sustainable Finance Disclosure Regulation (SFDR) is to increase transparency for sustainability in the financial market and to prevent financial market participants from greenwashing. Under the regulation, financial-market participants are required to report on the integration of ESG risks and the consideration of the principal adverse sustainability impacts on sustainable development in the investment process of products. Participants are also required to report on the provision of ESG related disclosures for financial products. The EU regulation primarily affects financial market participants and financial advisors. The regulation imposes certain requirements both at the company level and at the product level.
Product level
Under the SFDR, financial market participants and financial advisors are required to publish product information related to sustainability for environmental, social and governance (ESG) related products and non-ESG products. The regulation requires entities to classify the products or advice they offer in the following three categories: Article 6, Article 8 and Article 9. The definitions of these three classifications are as follows:
• Article 6 (grey): Financial products that do not integrate or take into account sustainability in the investment process.
• Article 8 (light green): Financial products that promote sustainability in the investment process. This means that the product promotes environmental and social characteristics and that the investment object complies with good governance practices.
• Article 9 (dark green): Financial products with sustainable investment as an objective in the investment process. This means that the product makes investments in an economic activity that contributes to environmental or social objectives and observes the ‘Do no significant harm (DNSH)’ principle. It is also assumed that the investment objective of this product complies with good governance practices.
SFDR classification of Fondita’s funds
• Article 8:
• Article 9:
SFDR classification: article 8, light green
The fund promotes environmental and social characteristics, among other aspects. As part of the fund’s investment decision process, environmental, social and governance (ESG) issues – and the risks associated with them – are taken into account. Fondita’s definition of ESG risk is the risk of an E (environmental), S (social) or G (governance) incident occurring that is serious enough to have a significant negative impact on the share price. In order to be aware of the risks for the funds, this aspect is taken into account in investment decisions. The fund applies a select-in and select-out approach, which means that the managers systematically include and exclude companies whose activities are not in line with the fund’s investment strategy and ESG ambition. In addition, the fund excludes certain controversial sectors and companies that violate the UN Global Compact Principles. The ESG analysis of the companies is carried out together by the ESG team and the fund managers. The funds have no official benchmark.
SFDR classification: article 9, dark green
Fondita Sustainable Europe has sustainable investment as its objective. From an ESG perspective, the aim of this fund is achieved by following the investment process and by finding companies with a positive impact on the environment in their operations. These companies enable us to achieve our global goals of reduced CO2 emissions and more efficient use of natural resources. The fund’s objective is to invest in companies that enable us to reduce our CO2 emissions, as defined by the Paris Agreement. We look mainly at what the company produces but also at its carbon footprint and carbon-reduction targets. As part of the fund’s investment decision process, environmental, social and governance (ESG) issues, and the risks associated with them, are taken into account. Fondita’s definition of ESG risk is the risk of an E (environmental), S (social) or G (governance) incident occurring that is serious enough to have a significant negative impact on the share price. In order to be aware of these risks for the funds, the aspect is taken into account in investment decisions. The fund applies a select-in and select-out approach, which means that the managers systematically include and exclude companies whose activities are not in line with the fund’s investment strategy and sustainability ambition. In addition, the fund excludes certain controversial sectors and companies that violate the UN Global Compact Principles. The ESG analysis of the companies is carried out together by the ESG team and the fund managers. The fund has no official benchmark.
Fondita