New EU rules to aid comparison of investments with sustainable elements

If there is one word that pervades all industries in Europe at the moment, that word is “Sustainability”. Increasing consumer demands with respect to the environment and social responsibility is one of the fastest growing trends in the 21st century. And that is the case whether you are talking about climate-friendly eating habits, choosing greener cars or buying products that are produced in an ethically correct manner. The same applies to the financial sector. As an investor, you can make a difference when your money is invested - whether you wish to avoid problematic investments or you are specifically interested in your money working to make the world a better place.

The challenge up to now has been that the EU’s financial sector has generally not had a common standard for how and when an investment product can be called green, sustainable, responsible or the like. Instead, individual investment product suppliers have largely categorised their product range themselves with regard to the degree of sustainability and ESG – a term that stands for environment, social and governance.
 

Transparency across Europe

To facilitate choosing between our funds based on ESG factors, we at Danske Invest introduced our own classification system under the name “ESG Inside” at the start of 2020. This is now being updated due to the new EU regulation that classifies investments into different categories across all EU countries. One of the aims with this is to increase interest in investment products with ESG elements and to create greater transparency, so suppliers of investment products cannot market themselves as being more sustainable than they really are.

Among other things, the new rules mean the EU’s financial sector can no longer sell investment products as sustainable unless they meet certain requirements defined in the legislation. These rules apply to funds as well and so also include Danske Invest. More specifically, this makes it easier for you as an investor to know when an investment product directly contributes to sustainable development or meets the criteria for ESG investments.
 

Danske Invest funds classified in various categories

As an investor in Danske Invest, this means your funds will be classified into various categories.

Some Danske Invest funds will not be covered by any of these designations. However, that does not mean these funds can invest just as they wish with respect to responsibility, as all Danske Invest funds have to comply with Danske Invest’s responsible investment policy. Hence, all our funds refrain from investing in companies that derive their revenues from tar sands or thermal coal, tobacco or from controversial weapons in accordance with certain set criteria, just as we also focus on active ownership.

The next level is termed ESG funds at Danske Invest. These are funds that in addition to considering sustainability risks in the investment process also focus on promoting ESG factors. The products do this by for example investing in companies that concentrate on climate issues, employee conditions, diversity or anti-corruption.

Funds that integrate the highest degree of sustainability will be called “sustainable funds” at Danske Invest. These are funds that as well as including sustainability risks in the investment process also comprise particular sustainable investments that specifically target the challenges associated with the green transition.
 

Ambition to be the Nordic leader

Danske Invest, which is categorised as a fund, does not currently have products that pursue a sustainable purpose and comply with the associated stricter requirements governing the investment process and reporting under the EU’s regulation on sustainability-related disclosure in the financial services sector. We have a specific ambition for the funds Danske Invest SICAV Global Sustainable Future and Danske Invest SICAV Euro Sustainable High-Yield Bonds to be categorised as sustainable funds in compliance with the EU regulation in the course of 2021. In the coming weeks and months, we will be focused on analysing and assessing these requirements, so we can ensure and document that the two funds fully meet the criteria for the most stringent category under the regulation.

At the same time, we would point out that approach of the two funds – Danske Invest SICAV Sustainable Future and Danske Invest SICAV Euro Sustainable High-Yield Bonds – to investing remains the same as when we launched the funds. Danske Invest SICAV Sustainable Future is still a focused equity fund where the strategy is to invest in companies that support a number of the UN’s 17 Sustainable Development Goals. Likewise, Danske Invest SICAV Euro Sustainable High-Yield Bonds continues to search out corporate bonds that are driven by a sustainable agenda.
 

What does this mean for you as an investor with Danske Invest?

The changes will have no direct consequences for you as an investor if you have invested in a Danske Invest fund. If you are invested through Danske Bank, you will be directly informed about this.

You can see which category the various funds are classified under on the fund’s website and from the lists of Danske Invest’s funds. We would always recommend that you speak to your advisor if you have any questions or are in doubt about something.
 
This material has been prepared for information purposes only and does not constitute investment advice. Please note that historical return and forecasts on future developments are not an indication of future return, which can be negative. Always consult with a professional advisor on legal, tax, financial or other matters that might be relevant in determining the suitability and appropriateness of an investment.