What's your sustainability profile?

As of 2 August a new MiFID II ESG regulation requires all financial advisers to ask about, and document, customers’ sustainability preferences on an equal footing with their risk preferences and time horizon when providing financial advice.  

At Nordea we have been asking customers about their sustainability preferences since 2019, so the new regulation does not imply major changes to our investment advice, but will over time probably change how people invest, explains Kerstin Lysholm, Head of Investment Products and Offerings in Nordea’s Investment Center:  

“We do see a clear upward trend in interest, close to 50% of our customers are now expressing interest in learning how to save and invest more sustainably. In 2019 it was only around 25%. It’s a really positive development. Because when you first articulate it to the customer, then it sets something into motion.”   

Steered public and private capital flows

And there is a need for something to happen, Kerstin Lysholm emphasises. There is currently an annual investment gap of almost EUR 180 billion to reach the EU's 2030 climate and energy targets, requiring both public and private capital. In 2018 the Action Plan on Financing Sustainable Growth was adopted by the EU countries and one of its objectives was to direct capital flows towards sustainable investments. The aim of the new MiFID II regulation is to ensure that customers become more aware of the impact of their investments.

An important question to the investment expert is whether awareness is always followed by action. When people say they want to invest responsibly, do they actually do it?

“While we see higher interest, customers still need some time to think about and adjust their investment portfolio. The share of inflow to Nordea’s sustainable investment products has tripled since 2019, so we are on a good development track and I think it’s natural with a time lag from awareness to action – especially in investments,” Kerstin Lysholm says.

An important aspect of customers’ cautiousness about adjusting their portfolio is also that sustainable investment products and the whole structure around them are still developing.

“We welcome the new regulation and the increased focus from the EU on defining what a sustainable investment product is, like the EU taxonomy for sustainable activities and Sustainable Finance Disclosure Regulation (SFDR). It’s really needed for customers to be able to navigate and decide how to make an impact. There now follows a big task for us financial advisers in translating it in a meaningful way so customers can understand the impact they can make and eventually act,” Kerstin Lysholm says.

Ambitious, aware or no preference? 

The latest addition to Nordea’s investment advice is therefore a new profiling tool which takes customers through a set of questions. The customer will, for example, be asked “How important is it for you that your investments work towards reducing the negative impact on the environment and society?” After the session customers will get an indication of whether they are ambitious, aware or have no preference in regard to sustainability.

“The new tool, and the new regulation, give us a more granular approach to the dialogue with the customer than before and is an opportunity to engage even more with them on the topic. I hope that we can support our customers with a preference for sustainability even better in transitioning to even more sustainable savings and investments,” Kerstin Lysholm concludes.