20-11-2024 08:00

Saving with sustainable focus: How green is green?

Funds that focus on sustainability – what does that really mean? How can investment funds be sustainable and who sets the requirements? More and more people are showing interest in this form of investment and there is regulation in place to support it. Get a quick overview.

Closeup of thoughtful businesswoman wearing eyeglasses seen through window

Responsible investing has grown steadily over the past years as more and more investors are considering environmental, social and corporate governance (ESG) factors before placing money and resources in a particular company or fund. But investing in funds with sustainable focus, also known as green funds, can seem complex.

Read on to learn more about how different sustainable investment funds are classified within the EU and what it means for an investment to be truly "green".

The EU has made sustainable investment classifications to help you

Maybe you have heard about Article 6, Article 8 and Article 9? These are classifications of investment funds. When it comes to sustainable investing, the Sustainable Finance Disclosure Regulation (SFDR) is good to know about. This regulation was made by the EU to make it easier for investors to understand how sustainable a financial product really is. It defines what sustainability information a fund must disclose.

The Sustainable Finance Disclosure Regulation classifies investment funds into three categories called Article 6, Article 8 and Article 9.

Article 6: These funds do not specifically aim to promote environmental or social goals, and they cannot be classified as sustainable.

Article 8: These are known as "light green" funds. They promote environmental and/or social characteristics, but this is not the main objective of the fund – or they exclude non-sustainable investments. These funds also need to disclose the degree of their environmentally and socially sustainable investments.

Article 9: These are the "dark green" funds with sustainable investments as their main objective. They represent the highest standard of sustainability.

Did you know?

All funds managed by Nordea are covered by our policy for responsible investment, meaning that fundamental ESG criteria apply – also to Article 6 funds – as long as it is a Nordea fund. For instance, Nordea funds do not invest in coal mining companies or illegal weapons.

In addition, all fund investments are regularly screened. If companies that violate international treaties are detected in the screening, we will engage in dialogue with these companies in an attempt to correct their conduct. This is one of the ways we practice active ownership.

More customers interested in investing sustainably

If you consider investing in funds with sustainable focus, you are not alone: investment based on ESG criteria is growing rapidly in Nordea. Up to 69% of our managed assets in 2023 were classified as ESG investments. In other words, more than two thirds of the assets we manage fulfil the requirements of Articles 8 or 9 of the SFDR.

This reflects the fact that Nordea as well as our customers are committed to integrate ESG factors into investment decisions.

The criteria cover three areas

ESG criteria are about these three letters:

E

E stands for environmental issues such as reducing greenhouse gas emissions, reducing pollution and taking action to improve biodiversity and protect nature – for example transitioning to fossil-free energy sources or developing less resource-intensive production methods.

S

S stands for social – that is how businesses take social responsibility. It’s how they respect human and employee rights and work with diversity and equality. Examples could be offering employment programmes for employees who need special accommodations to be part of the work force or being involved in social community activities such as mentoring programmes, youth programmes etc.

G

G stands for governance – meaning how companies work with good governance practices such as transparent tax payments and employee remuneration programmes and diversity of their board of directors. Examples could be implementing anti-corruption and bribery policies and education programmes and ensuring equal pay.

How to get started

Nordea offers several funds that meet sustainability criteria – see the sustainability-related information for each fund in Nordea’s Netbank or on our Nordea Funds website.

In some of our funds, sustainability is a key element:

Some of our funds choose their investments based on a specific sustainability theme such as social impact, equality or combatting climate change.
Our sustainable balanced funds, on the other hand, combine various ways of considering sustainability in addition to different investments and investing philosophies.
Our Stars Funds are a set of funds with handpicked companies that have well-managed ESG profiles. The selection is made through a combination of ESG analysis, company dialogues, thematic research and field trips.

Sustainable banking

Pensions and savings

ESG

Insights