Swedish regulator to screen funds for ‘green painting’

Sweden’s financial regulator said it will start reviewing funds to enforce new sustainable regulations and to prevent “green painting.”

The Swedish Financial Supervisory Authority, or Finansinspektionen, said it will review “whether the information provided about the funds that are classified as most sustainable meets the strict requirements” of sustainable finance disclosure regulation rules implemented in March 2021.

In a notice on its website Tuesday, FI said that as demand for green and sustainable funds increases rapidly, “this entails the risk of green painting, i.e. that activities and products are presented as more sustainable than they are in practice.”

The regulator has identified green painting as one of the biggest risks in the financial sector for 2022, and made it one of five priority areas, the notice said.

With the financial sector playing a central role in the climate transition and sustainable development, “it requires investors to trust that green investments are as green as they are portrayed. Combating green painting is therefore central to maintaining confidence in sustainable investments,” the FI notice said.

It noted the SFDR rules call for financial companies to provide sustainability-related information to investors, particularly funds that have sustainable investments as their goal, Article 9 funds under SFDR.

“Therefore, in the framework of an in-depth analysis, we will review whether the information that fund managers provide to investors about their Article 9 funds meets the requirements. This includes reviewing information brochures and fund regulations to assess whether the information meets the requirements of the most sustainable funds.

Johanna Fager Wettergren, head of sustainable finance for the regulator, said in the notice that consumers and investors must trust the information, especially “for those funds that want to appear the most sustainable because there is a great demand for these types of funds.”

The in-depth analysis is expected to be completed…

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