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SKAGEN to reclassify equity funds as Article 8 under SFDR

2 septembre 2021

SKAGEN's equity funds are to be reclassified as Article 8 under the EU Sustainable Finance Disclosure Regulation which applies "where a financial product promotes, among other characteristics, environmental or social characteristics or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practices". They were previously categorised as Article 6 which covers funds that are not promoted as having ESG factors or objectives.

The equity funds will be managed in accordance with Article 8 effective immediately with the reclassification formally taking place from 1 July 2022 when more detailed Level 2 rules and disclosure requirements of SFDR come into effect.

ESG integration enhanced

The move to Article 8 reflects the continued strengthening of SKAGEN's approach to integrating sustainability into its investment process. There will be no changes to the current portfolios as a result of the reclassification but in future the funds will formalise and disclose how environmental and social factors are informing stock selection and subsequent decisions throughout the investment process.

We are also enhancing the integration of ESG risk analysis into our investment process, which will now be built on the following four pillars:

  1. Exclusion: All potential investments are screened and approved against the SKAGEN Sustainable Investment Policy.
  2. Enhanced due diligence for companies in high emitting industries: Any investment will be subject to an added due diligence process to identify and assess potential climate risk.
  3. ESG factsheet identifying ESG factors: Produced for each investment case and includes a dedicated ESG overview – including material ESG data, potential engagement plan and KPIs as well as a traffic light assessment of overall ESG profile. 
  4. Active Ownership: Engage and collaborate with holding companies by voicing our views on how to achieve ESG improvements over time.

The result of these changes will be greater rigour in our ESG process and more detailed disclosure on how SKAGEN embeds sustainability in its investment process to achieve the best possible risk-adjusted returns for our clients. Further details about our approach to sustainability can be found here.

Timothy Warrington, CEO of SKAGEN Funds, commented:

"With a long track-record of successfully integrating sustainability into our investment process and actively engaging with portfolio companies, SKAGEN is well positioned for the introduction of SFDR in Norway and abroad. Our equity funds will be categorised under Article 8, reflecting SKAGEN's ambition to secure the financial security of clients in a way that leaves the world a better place."

Frequently Asked Questions

1. What is the Sustainable Finance Disclosure Regulation (SFDR)?

  • SFDR is a new set of EU rules for increased comparability and reduced greenwashing among financial products.
  • The regulation will increase the information available for investors about both the potential positive and negative impact of their investments and the related ESG risk.

2. What are these Articles?

  • The SFDR sets out strict criteria for the classification of funds that are defined as sustainable. These criteria are described in the regulation’s Articles 6, 8 and 9:
    • Article 9 (also known as 'dark green') funds are products that have sustainable investment as their objective.
    • Article 8 (also known as 'light green') funds are 'environmentally and socially promoting’ products.
    • Article 6 covers funds that are neither Article 8 nor 9, however sustainability may still be part of the portfolio manager's process.

3. How will I as a client notice the change from Article 6 to Article 8?

  • The strategy and objective of our equity funds remain the same as before.
  • What you might notice in the wake of this change is an increase in client communication and reporting. Transparency and honesty have always been integral to SKAGEN and we will continue seeking to ensure that you have all the information you need to understand how we systematically work with sustainability and responsibility principles through the investment process of our equity products so that you can use this information to make an informed decision about the fund you would like to invest in.

4. What does it mean for the investment process/management of my funds?

  • It means that clients can be confident that the sustainability and responsibility factors of an investment are rigorously assessed and acted upon through several steps in our investment process.
  • This includes the initial screening of a new investment idea, analysing specific ESG factors and their potential financial risks and opportunities, exercising ESG engagement and active ownership once invested, and ultimately holding companies accountable to our ESG Policy and principles.

5. What is SKAGEN doing, in practice, to improve its ESG work?

  • It is important to note that improving our ESG work will always be a continuous learning process but in the wake of these changes, we are introducing some key initiatives.
  • The first is to bring onboard additional resources to meet regulatory expectations and requirements as well as bolster the analytical insight throughout the investment process.
  • We have also expanded and revised our ESG integration framework meaning that ESG will be an area of even closer collaboration and focus across the investment team. This will provide our portfolio managers with even more information to make the best possible investment decisions on behalf of you as a client.

6. Will the article change improve returns in SKAGEN's funds?

  • SKAGEN's objective will always be to maximise risk-adjusted returns for our clients. Sustainability is an important part of this, both to reduce potential risks to our investments caused by ESG factors and using them positively to identify opportunities to improve fund returns.


SFDR: A reminder

The EU Sustainable Finance Disclosure Regulation (SFDR) came into effect in March 2021 and requires fund managers to provide a series of declarations and disclosures concerning the sustainability of the funds they manage. The rules aim to increase transparency over the ESG impact of their investments and are designed to drive sustainable investment and reduce greenwashing by classifying funds as Article 6, 8 or 9.

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