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 funds promote, among other things, environmental and social aspects. As part of the funds’ investment process, ESG issues are taken into account in investment decisions. Investment decisions take into account environmental and social issues and the risks associated with them. The funds invest in companies that follow good governance practices. ESG risks are defined under the SFDR Regulation (Article 2) as an environmental, social or governance event or circumstance which, if it were to occur, would have a significant actual or potential negative impact on the value of the investment. As part of the ESG analysis of an investment object, the manager, together with the ESG team, identifies each investment object’s sustainability risks, the likelihood of these risks materialising and the magnitude of the impact. All potential investment targets are subject to both an ESG analysis and a business analysis. We continuously assess the holders’ sustainability risks, their likelihood and magnitude as part of our investment process. Any sustainability risks that materialise may have a negative impact on the holding and therefore the fund’s returns. We continuously monitor these risks and, based on our assessment, this may have an impact on our investment decisions. We believe that one of the main sustainability risks that may affect the value of the funds’ investments is related to environmental and climate issues. We manage these risks by excluding certain controversial sectors and conducting a thorough sustainability risk assessment of the sectors in which we invest. ESG analysis of the companies is performed jointly by the ESG team and the fund managers. The funds do not have an official benchmark.
SFDR classification: article 9, dark green
The objective of Fondita Sustainable Europe is sustainable investment. This objective is primarily achieved through the fund’s strategy of investing only in companies that enable, through their products or services, reduced CO2 emissions in accordance with SFDR article 9.3 and/or more efficient use of natural resources. These are the fund’s two focus areas. In addition, the fund excludes all companies active within fossil energy sources. The emissions of the holding (scope 1 & 2) are monitored regularly, and the holdings must have a clear strategy to reduce emissions. We also require the companies in which the fund invests to act responsibly in terms of their own environmental impact and social responsibility. The fund invests in companies that follow good governance practices.
All investments meet the requirements for sustainable investments set out in Article 2 of the SFDR Regulation and do not cause significant harm to any of the other environmental or social objectives.
Investment decisions take into account environmental and social issues and the risks associated with them. ESG risks are defined under the SFDR Regulation (Article 2) as an environmental, social or governance event or circumstance which, if it were to occur, would have a significant actual or potential negative impact on the value of the investment. They also refer to a company’s vulnerability to the effects of climate change, depending on its geographical location and its overall business. As part of the ESG analysis of an investment object, the manager, together with the ESG team, identifies each investment object’s sustainability risks, the likelihood of these risks materialising and the magnitude of the impact. All potential investment targets are subject to both an ESG analysis and a business analysis. We continuously assess the holders’ sustainability risks, their likelihood and magnitude as part of our investment process. Any sustainability risks that materialise may have a negative impact on the holding and therefore the fund’s returns. We continuously monitor these risks and, based on our assessment, this may have an impact on our investment decisions. We believe that one of the main sustainability risks that may affect the value of the fund’s investments is related to environmental and climate issues. We manage these risks by excluding certain controversial sectors and conducting a thorough sustainability risk assessment of the sectors in which we invest. ESG analysis of the companies is carried out jointly by the ESG team and the fund manager. The fund does not have an official benchmark.
Fondita