Unclear information about sustainable funds

The disclosures provided about funds with sustainable investment as their objective are often unclear. This is the conclusion of an in-depth analysis conducted by Finansinspektionen (FI). In many cases, the disclosures provided in the funds’ prospectuses need to be clearer and more specific.

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FI analysed whether the prospectuses for funds with sustainable investment as an objective meet current transparency requirements. The analysis shows in part that the disclosures are unclear in several cases. For example, it is often unclear what is considered to be a sustainable investment and to which environmental or social objectives the fund contributes. This ambiguity also makes it difficult for a consumer to understand and compare funds.

"Managers need to be better at providing clear and comparable information for those who want to invest in sustainable funds. This is important for making informed decisions," says FI's Head of Sustainable Finance Johanna Fager Wettergren.

FI will continue to analyse the fund disclosures and take steps towards necessary improvements through a dialogue with the industry.

"We know that the firms are working extensively with the implementation of the new regulations. In a next step, we would like to encourage the industry to increase its collaboration in order to make joint assessments and use common terminology in order to make it easier for consumers to understand and compare sustainable financial products," says Fager Wettergren.

In cases where FI sees a need for more follow-up, this will occur with the fund managers in question.

New rules have been in effect since March 21 on the sustainability-related information that financial firms must disclose to investors – the EU Sustainable Finance Disclosure Regulation (SFDR). The strictest information requirements are placed on products that have sustainable investment as their objective. The regulation aims to make investors more knowledgeable about sustainability risks, improve comparability between financial products in terms of sustainability, and reduce the risk of greenwashing.

FI's in-depth analysis includes 30 funds registered in Sweden that have sustainable investment as their objective.

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