Nordics Present Muted Response to EC Proposal


Stockholm (NordSIP) – August 23 was the deadline to publish comments on the acts adopted on May 24 by the European Commissions, in the context of the initiative “Institutional investors’ and asset managers’ duties regarding sustainability”. While a large number of European institutions have reacted to the proposal with varying degrees of satisfaction, the reaction of the Nordic institutions is rather muted. Only three institutions have posted comments, of which two in Sweden (banking group Swedbank and municipal green bond issuers Kommuninvest) and one Finnish association (Nordic Securities Association).

Swedbank recognises the importance of sustainable investment practices and welcomes the harmonisation of rules and definitions, including the establishment of a common taxonomy. However, the bank also emphasises the need for such a taxonomy to remain flexible “in order to effectively promote the further development of sustainable finance while incorporating in the taxonomy the dynamics of the area of sustainable finance as well as existing technical and regional differences within the EU.”

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Furthermore, Swedbank shares some of its expertise and proposes a number of critical areas to focus on, when establishing an effective taxonomy. Specifically, the comment notes data-related issues, such as availability and access to data, matching of data and assets and data administration. It also refers to the necessity to include aspects beyond the environment, such as social and circular matters.

As the largest Swedish-based issuer of green bonds, Kommuninvest’s comments focus primarily on this core market, and most specifically on one aspect related to avoiding the incineration of waste. If adopted as currently stated, the rules would prevent some projects to qualify for green bond financing, even when they provide other significant environmental benefits.

The Nordic Securities Association expresses similar concerns to those Swedbank touches on, and advocates for a “flexible and dynamic” taxonomy. “There is a risk that issuers cannot issue ESG instruments adequately in line with [the taxonomy], if the rules are too detailed and strict.”

It also warns against adopting arbitrary limits and definitions. “The criteria for what counts as sustainable operation should be science-based and as neutral as possible with regards to different industries and sectors. It should not create a static binary division between ‘good’ and ‘bad’ industries, but rather it should create incentives for all operators to improve their positive impact to the sustainable development goals (SDGs).”

Many other European critics outside the Nordics were even more vocal against the prescriptive nature of the text. The European Fund and Asset Management Association (EFAMA) warned that, according to its current wording, the proposal seemed to equate sustainable investments with impact and thematic investing. Meanwhile, UK insurance group Aviva stated that the current version of the legislation “might discourage sustainable investment through proactive stewardship of investments to promote sustainability, for example through company engagement and voting”.

Picture from Pixabay

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