BANKS & INVESTMENTS

All your work – paid or unpaid – has an impact on the earth in one way or another. But have you thought about what impact your money has?

Even if we do our best to live sustainably, it can be difficult to know where our money is invested through the bank. Companies you might never choose to invest in can be part of the fund you own, without you being aware of it. 

So how to make sustainable investments? How sustainable is a “sustainable fund” really? Are some banks better than others? Just like you can make a difference in how you choose to spend your money, you can make a difference by reviewing how you save and invest.

Conscious investments and investments mean that you can let your money work for achieving the Sustainability goals. If you have not actively taken a stand on issues of sustainability when you have chosen where you place your money, there is a risk that they support companies that are harmful for the environment and the people

Choosing a bank

Many banks demand that their investments take responsibility from a sustainability perspective, both socially and environmentally. Fair Finance Guide is an international initiative that examines how sustainably banks invest and lend money. Their annual review of Swedish banks’ sustainability ratings (2020) showed that several banks are anchoring sustainable investments in their operations. Guidelines for corruption, human rights and working conditions are defined clearly, but the climate area, forestry, oil & gas, and tax evasion have also improved since previous years’ reports. Despite this, some loopholes allow for the unresponsible investment of some capital. At Fair Finance, you can read more about the individual banks’ sustainability work and easily compare the banks against each other. You can also read about the bank’s position on various issues such as weapons, corruption, climate change, animal welfare or human rights.

What type of bank?

There are not only many different banks to choose from but also different types of banks. What business model a bank has affects how it will use your money. Below you will find a summary of some different types of banks and how their model can contribute to your money working sustainably:

Commercial bank 

• the most common type of bank. Sweden’s largest banks are all commercial banks
• the main purpose of making a profit through high returns to its shareholders 
• can choose not to maximize the profit at any price but only to the extent that is in line with values ​​and principles that the company decides on – for example, sustainability guidelines

Savings bank

• local banks that work to promote savings
• is subject to the Savings Banks Act, which means that they have no owners and, like foundations, have so-called principals who carry out supervision and appoint the bank’s board
• the profit is distributed under the terms specified by the founders or reinvested in their own banking operations
• often the profit goes to support projects and activities locally in the area where the bank operates, which can mean support where social, economic, and environmental sustainability aspects benefit

Member bank

• an economic association that is subject to the Member Banking Act and has the purpose of promoting the members’ financial interests through the banking activities in which the members participate through the use of the bank’s services.
• the services can be adapted to work for specific interests by focusing on specific areas to which the money is directed, for example, sustainability purposes.

Sweden has two member banks: JAK Member Bank and Ekobanken

Fonder

When you buy shares, it is easy to choose companies you know rhyme well with your values. Funds can be trickier – how do you know that fund managers do not invest in companies that you would never choose otherwise? Fortunately, there is a lot of help available for you as a consumer to make sure that your funds support what you care about.

Many banks today offer funds that take into account sustainability issues and ethical considerations. These funds combine different strategies to achieve their status as a “sustainable fund”, for example select companies that actively work for sustainable solutions, opt-out of companies with unsustainable activities (eg the coal and oil industry), and influence companies that they have chosen to switch to a more sustainable business.

To find out how a specific fund integrates sustainability, you can read the fund’s information brochure, which describes the fund’s methods and strategy for acting sustainably. Sweden’s Sustainable Investment Forum (SWESIF) is an interesting forum with the aim of raising knowledge about investments for sustainable development. It offers the sustainability profile to ease the search for funds and find out what their guidelines are, which companies they reward and opt-out of. Alternatively, there is the Fund collection which the Fund Companies’ Association is behind, where you can search and compare funds but also find information about sustainable funds. There are also Nordic Ecolabelled funds that are labeled because they influence companies in a sustainable direction.

More about sustainability funds

Sustainability funds in particular have increased in demand in recent years. A report from the European Fund and Asset Management Association (Efama) – “ESG investing in the Ucits market – a powerful trend (2021)” shows that sustainable funds have grown in number (both brand new funds and existing funds that have added sustainability criteria) in a proportion to the general capital invested. In addition, the report shows that sustainable funds had a better development and return than other funds in 2020. This means that investors do not have to sacrifice returns on their investments when choosing sustainable funds.

Sustainability funds can also be named with different acronyms:

• “SRI Funds” – Sustainable and Responsible Investments.
• “ESG Funds” – Environmental, Social and Governance, ie issues concerning environmental considerations, social considerations (for example: working conditions or human rights) and corporate governance.

Taxonomy

March 10, 2021, a new EU regulation on sustainability-related information was introduced. A kind of regulations / taxonomy for what kind of investments should be called green. This means that the funds that will in future be named / marketed as sustainable and ESG investments meet the established criteria of the legislation. The taxonomy includes the following six environmental objectives:

• limiting climate change,
• climate change adaptation,
• sustainable use and protection of water and marine resources,
• conversion to a circular economy,
• prevention and control of environmental pollution
• protection and restoration of biodiversity and ecosystems.

It also contains a new form of labelling to explain the green funds’ type of relationship to sustainability:

• light green funds – promotes environmental or social characteristics
• dark green funds – funds with sustainable investments as a goal

The labeled funds will be supplemented with information about the fund’s environmental objectives or environmental properties and how large a part of the investments are environmentally sustainable in the information brochure and the annual report.

Tips for conscious saving and investing

• Use the Fair Finance Guide to guide you right in sustainable finance! You can compare banks, see their sustainability ratings and read reviews of the banks’ performance. You will also find practical approaches for how you can put pressure on your bank to work more sustainably and create demand for a more sustainable solution, which creates an impact on the financial industry.
• Take advantage of the banks’ offer of “sustainable funds”. To find out a specific fund’s method for integrating sustainability, you can read the fund’s information brochure. Is there such a thing? Put pressure on your bank and ask how your funds are used and consider switching if there is a lack of transparency.
• Use tools and labels that show whether the funds are sustainable, for example: The sustainability profile, the fund check and the Swan.
• Soon, the EU’s new regulation on sustainability-related information will enter into force. This means that you can be more confident that the funds marketed as green in the EU meet a set standard. Look out for light green and dark green funds, these meet the requirements and should provide more information on how and in what way the fund is sustainable.
• Review your pension funds at the pension authority and use their search tools to find funds that have a sustainability profile and match your wishes: further reading about insurance and pension savings here.

 

Updated 2021