New EU rules for sustainable investments – what does this mean for you?
More and more people want to ensure that their investments are responsible and support sustainable conditions. New EU rules will soon come into force to regulate the area for these type of investments, and here you can learn about what this means to you as an investor.
The purpose of the EU’s new regulations on sustainable investments is, among other things, to increase interest in sustainable and environmental, social and governance (ESG) investment products. The regulations will come into force from 10 March 2021 and are intended to provide transparency for investors and hereby counter greenwashing – i.e. the practice whereby a provider of an investment product gives the false impression that the product is more sustainable than it actually is.
In future, investment products must meet certain criteria in order to be marketed as sustainable or ESG investments. This applies to funds, pension solutions and investment solutions for which Danske Bank makes investments on behalf of our customers. Specifically, this means that it will be easier for you as an investor to see when an investment product is a sustainable investment or an ESG investment.
What is the difference between sustainable investment products and ESG investment products?
Sustainable investment products
Investment products with a sustainable investment objective are called Sustainable investment products. These products invest in activities aimed at solving some of the challenges facing the planet and contributing to a more sustainable society. For example, the product’s investments have a low climate impact, or it invests in activities to ensure clean drinking water, reduce energy consumption, increase biodiversity, reduce pollution or ensure greater social equality. Also, the investments in a Sustainable investment product do not have major adverse effects on other sustainable goals.
Sustainable investment products comply with Article 9 of the EU regulation on sustainability‐related disclosures in the financial services sector.
Because the rules recently entered in to force, we do not have any products that live up to the criteria for sustainable investment products at present, but we are working on being able to offer these as soon as possible.
ESG investment products
Investment products that promote environmental or social issues and ensure good governance practices (ESG) are called ESG investment products. These products promote ESG by investing, for example, in companies that focus on climate and employee conditions, diversity or anti-corruption activities. They can also work actively to influence companies to become more sustainable or to refrain from investing in companies that have a large and detrimental climate impact.
Our ESG investment products comply with Article 8 of the EU regulation on sustainability‐related disclosures in the financial services sector.
What do the regulations mean for your investments with us?
If you have investments with us, we will contact you if the new regulations or other initiatives affect you directly, for example if we change the name of a fund you have invested in. You do not have to do anything.
New labels for Danske Invest funds
If you invest in funds from Danske Invest, you will in future come across new labels that show you that a fund meets the criteria for sustainable investment products or for ESG investments. The labels replace our previous product labels – ESG Inside – and they make it easy for you to see which criteria the funds in Danske Invest fulfil. Danske Invest currently does not offer sustainable funds, so at present you will only find funds labelled with the ESG label. We are working to be able to offer sustainable funds during the course of 2021.
Responsible investments – a developing area
For many years, Danske Bank has been working to integrate ESG risks into our investment processes. We are also working on being able to offer our customers an increasing number of responsible investment products in the coming years within the framework of the new EU legislation.
In the years to come, more investment initiatives will be taken by the EU – initiatives that in the long term will support sustainable development and make it more transparent and attractive for you as an investor to invest responsibly.
Our Responsible Investment Policy
To accommodate the new EU rules, we are changing our Sustainable Investment Policy. In future, the policy will be called the Responsible Investment Policy and will detail:
- how we integrate sustainability risks into our investment processes and in the selection of investment products made available to advisers when they meet customers
- our requirements for sustainable investment and ESG investment products
- how we continue to use active ownership to shape the companies of the future and drive society in a more responsible and sustainable direction.
- how screening and investment restrictions are used as tools in our work to reduce sustainability risks and to select investments that can deliver attractive and long-term returns
What should I do if I have invested in a sustainable or ESG product today?
You do not have to do anything. If you have invested in a fund or a solution for which the new rules mean changes, e.g. changes to the name of the fund or in the composition of the product, we will contact you directly.
How do I know if a product or fund is a sustainable investment or ESG investment?
If you invest in funds from Danske Invest, you will in future come across new labels that show you that a fund meets the criteria for sustainable investment products or for ESG investments.
I have invested in a fund that has changed its name. What does this mean for me?
The new EU legislation sets the criteria for when a fund’s investments may be considered as being sustainable or ESG, which means that we are changing the names of selected funds. This does not affect the fund’s current investments or the fund’s risk profile.
Why do you not have any sustainable investment products or funds?
Currently, no Danske Invest funds fully meet the criteria set out in the new EU regulation for when a fund can be categorised as a ‘sustainable fund’. This is because we do not have the final processes for these types of products in place. But we are very ambitious about our product offering, and we continue to work on strengthening our processes to ensure and document that relevant funds can be categorised as sustainable investment funds. We hope to be able to offer sustainable funds in the near future.
What about investment products and funds that do not have a label denoting sustainable investment or ESG investment – are these irresponsible investments?
No, they are not. All Danske Bank products and Danske Invest funds comply with the Danske Bank Group’s Responsible Investment Policy. The policy stipulates that sustainability risks continue to be included on an equal footing with other risks when we make our investment decisions. Screening and investment restrictions are also key tools in our work to reduce sustainability risks, and these practices enable us to select investments that can deliver attractive and long-term returns.