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Watchdog to scrutinize Article 9-funds to prevent greenwashing

The Swedish FSA sees risks for greenwashing as sustainable funds’ popularity surges. The regulator will now analyze whether fund managers’ information lives up to the demands.

Finansinspektionen (Swedish FSA) headquarters in Stockholm | Photo: https://www.fi.se/en/about-fi/

Sweden’s financial regulator Finansinspektionen is starting an evaluation of sustainable funds, specifically focusing on the information disclosed for Article 9 funds.

The FSA is aware of the rising popularity of sustainable financial products and even more aware of the risks of greenwashing it can bring, stating that businesses and products are often made to look better than they are in reality.

“The financial sector can play a central role in the climate transition and contribute to a sustainable development. But this means that investors have to be able to trust that green investments are as green as they’re portrayed. Fighting greenwashing is therefore a key part of ensuring the continued trust in sustainable investments,” the Swedish FSA writes in a statement.

This is a deeper and more thorough analysis, as it will specifically zero in on the information managers provide investors about their Article 9 funds. Information and regulatory documents will be analyzed to ensure that everything adds up to the tough demands the funds have to live up to according to the SFDR.

“Consumers and investors have to be able to trust the available information. This is even more important for the funds that are marketed as the most sustainable alternatives, as there is a huge demand for them,” Swedish FSA’s Head of Sustainability Johanna Fager Wettegren says.

The analysis can also be the basis for continued dialogue with the fund industry, helping it navigate the continued work with new regulatory demands.

Greenwashing has been identified as one of the key financial sector risks and the FSA deems it one of the five top priority areas to analyze deeper during 2022.

The sustainable fund analysis is expected to be completed before the summer.

A first evaluation of the implementation of SFDR was already conducted by Finansinspektionen last year and found that certain managers needed to update information to correctly reflect the existing legislation. It had found that 18 of the 381 funds marketed as sustainable in information available to potential investors were not classified as Article 8 or Article 9 funds.

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