As a private investor, there are multiple considerations to take into account when choosing where to place your capital. Return on capital is for most people the main criteria when investing in fund products rather than in a savings account. But have you given any thought to the part sustainability plays in your savings? The individual sustainability preferences of private investors vary tremendously. Hence, there is no "one-size fits all" solution, and each investor should evaluate if they are comfortable with how sustainability is considered in their personal portfolio. Irrespective of whether you think sustainability considerations are very important, or could not care less, the SFDR helps you navigate between the two points, and everything in between.
Level of ESG ambition
When navigating the world of sustainability, it is useful to know that the SFDR uses a classification system to differentiate between the levels of ESG ambition in a fund. All funds are assigned an in-scope disclosure requirement depending on their level of commitment to ESG and sustainability:
- At a minimum, all funds will be Article 6, i.e., funds that do not have any ESG ambition but nonetheless need to disclose how sustainability risks are – or are not – considered.
- Article 8 funds, often described as "light-green", are funds that promote environmental or social characteristics in some way.
- Article 9 funds are so-called "dark green" funds that have a sustainable investment objective, meaning the main goal of the investment is to promote sustainable investments. Impact funds or thematic funds with a set objective, are typical examples of Article 9 funds.
We are proud to say that all SKAGEN's equity funds are classified Article 8, so-called "light-green". That implies that none of SKAGEN's equity funds have a sustainable investment objective per se. All of SKAGEN's equity products make investments with the main goal of providing clients with the best possible risk-adjusted return. Nonetheless, we promote environmental and social characteristics by having ESG and sustainability as an integrated part of our investment strategy as we believe ESG factors are key in generating long-term risk-adjusted returns.
An integrated part of the investment process
ESG is integrated in all parts of SKAGEN's investment process. Prior to investing, all potential investments are subject to ESG screening and must be cleared before any investment is made. Once we have invested in a company, material ESG factors are tracked and analysed on a continuous basis. As an active value-based fund manager, we have the benefit of having a manageable number of companies in our portfolios so are able to do company-specific analysis on all our holdings. This gives us thorough knowledge of the sustainability-related risks and opportunities present in our funds. As an active owner, understanding these risks and opportunities forms the basis of ESG-related company dialogues and engagements.
SKAGEN has been incorporating ESG considerations ever since publicly stating our ESG guidelines in 2002 and will continue to do so in the future. One aspect of the SFDR is the obligation to disclose an increasing amount of information about the products' ESG integration. Our view is that this increased disclosure is a useful tool to help investors make-better informed decisions when selecting which funds to invest in.