Stockholm (NordSIP) – It just got tougher for Nordic funds to gain the desirable Swan Ecolabel. On 15 January, Nordic Ecolabelling announced that they are tightening the requirements for funds and savings products aspiring to wear their popular green badge. It has been almost five years since the company launched the first version of the funds’ Ecolabel criteria. By the end of 2021, over 70 investment products from 25 different companies carried the Nordic Swan Ecolabel. Meanwhile, the demand for a credible, independent guarantee that products marketed as sustainable indeed meet ambitious sustainability criteria is growing steadily.
“The criteria of the Nordic Swan Ecolabel are tightened regularly to reflect the progression of the market,” comments Per Sandell, Head of Financial services at the Nordic Ecolabelling. “Sustainable investment has taken many steps forward since the first generation of our criteria was launched in 2017. Therefore, we sensed that this is the right time for us to raise the bar, also integrating relevant parts of the EU regulatory framework in a sensible manner,” he adds.
A Nordic Swan Ecolabel fund must comply with requirements within several different areas. It needs to exclude the most unsustainable industries and companies from their portfolio while proactively including more sustainable companies. The managers need also to demonstrate that they exercise active ownership. And all of this has to be done in a well-documented and transparent manner.
The updated version of the Ecolabel qualifying criteria introduces stricter climate requirements, among others. Holding companies in industries emitting large amounts of greenhouse gases, such as the cement and the steel industry, must meet the specified transition requirements and show that they are among the best in their sector.
A new feature is also the increased focus on biological diversity. A Nordic Swan Ecolabelled fund is explicitly required to attempt to influence any company negatively affecting biodiversity to reduce its adverse impact and report about the situation in its sustainability report.
While the rapidly evolving EU sustainable regulation framework has made life easier for both investors and consumers of financial products, it still leaves a lot of space for interpretation and stretching of the rules. “The Nordic Swan Ecolabel is a recognized and credible label among Nordic private and professional investors. Thus, the label provides a clear and strong means of communicating the product’s sustainability profile. In the new set of criteria, we have leveraged on the EU regulations such as the EU Taxonomy and SFDR to set meaningful boundaries and thresholds,” says Sandell.
Only funds classified under article 8 or article 9 of SFDR, which use the EU Taxonomy in their models and analysis, are eligible to apply for the label. Moreover, funds that invest in companies aligned with the taxonomy are rewarded with extra points.
According to Sandell, although a Nordic Swan Ecolabelled fund has demonstrated and documented compliance with strict sustainability criteria in several areas, such a product can still contain companies in transition and holdings that are perhaps not perceived as the most sustainable. “However, our transparency criteria are set so that the fund must communicate openly about the status of holdings that have breached international norms, emitted large amounts of greenhouse houses, or performed poorly with respect to biodiversity conservation,” he says. “As with other industries, unfounded claims about greenness or sustainability also circulate in the financial sector. Independent labels can provide a means to counteract greenwashing, as they offer external verification of a product’s sustainability profile,” concludes Sandell.