Published 15 April 2024 (version 2)
Background and scope
Regulation (EU) 2019/2088 on sustainability‐related disclosures in the financial services sector (“SFDR”), as incorporated into Norwegian law through the Act on sustainable finance, requires financial advisors like Carnegie AS (“Carnegie”) to transparently disclose specific details on the integration of sustainability risks into their investment advice.
As Carnegie is classified as a financial adviser under the SFDR, we are providing the following information in compliance with the requirements outlined in the SFDR.
Transparency of sustainability risk
Policies for sustainability risk integration
The SFDR requires Carnegie to disclose information about our policies, if any, on the integration of sustainability risks in our investment advice.
In accordance with the SFDR, sustainability risk means an environmental, social or governance (ESG) event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of an investment.
Carnegie exclusively provides investment advice to professional investors, specifically limited to financial instruments such as shares and bonds. Carnegie does not offer investment advice on financial products as defined by the SFDR (e.g., funds, pension products, etc.).
While Carnegie acknowledges the importance of considering sustainability risks associated with investments, investment firms are currently facing challenges in obtaining comprehensive data from issuers about their exposure to such risks. Until we can reliably integrate sustainability risks associated with investments into our advisory, we will not systematically incorporate these risks when providing investment advice to our clients.
We remain committed to discussing sustainability factors and risks associated with the financial instruments of the issuers/companies we cover in our advisory, both more broadly and on an ad hoc basis, e.g. in extension of equity and fixed income research reports published by Carnegie (please see below for further information of our research services).
Sustainability preferences in investment advice
Carnegie’s sales and trading desks may provide investment advice to professional clients. Therefore, when offering investment advice, we assess the suitability of the advice for clients in relation to investments in financial instruments.
For clients expressing sustainability preferences, we seek clarification on whether they prefer financial instruments aligning with the EU Taxonomy definition of environmentally sustainable investments, the SFDR definition of sustainable investments, and / or those accounting for principal adverse impacts (PAI) on sustainability factors.
Currently, several issuers/companies do not report sustainability/ESG-related information or use PAI indicators to measure and report comprehensive sustainability data points. This will in turn impact Carnegie’s ability to align advice with clients’ sustainability preferences. As more sustainability data becomes available, Carnegie may enhance its capacity to provide advice aligned with clients’ sustainability preferences.
For more information of the Carnegie group’s latest PAI reports (only incl. certain subsidiaries) please refer to: https://www.carnegiegroup.com/sustainable-finance-disclosure-regulation-sfdr/
Sustainability considerations in research
Sustainability is one of the focus areas across our different business areas, especially driven by our equity and fixed income research teams. In recent years, we have been actively enhancing our approach by better incorporating sustainability considerations into our research services.
The Carnegie research teams generally include quantitative and qualitative sustainability metrics in the research reports and strive to prioritize companies that integrate sustainability risks in their strategy to drive growth and that actively avoid such risks.
Principal adverse impacts and group initiatives
No consideration of adverse impacts of investment advice on sustainability factors
Carnegie does currently not consider adverse impacts of investment decisions on sustainability factors in our investment advice to clients.
Carnegie may provide investment advice, however, only to professional investors, and to a limited extent. However, the lack of consideration of adverse impacts relating to sustainability factors is primarily attributed to insufficient data, as previously mentioned above. As an increasing number of issuers publish data pertaining to adverse impacts on sustainability factors and report on goal attainment, Carnegie will explore the adaption of internal procedures and tools to systematically incorporate the consideration of adverse impacts into our advisory services.
Carnegie group initiatives regarding the UN Global Compact (UNGC)
The Carnegie group has, among other sustainability related initiatives, signed the UN Global Compact. The group thereby supports and commits to follow the ten principles on human rights, labor, environment and anti-corruption.
The group strives to avoid exposure to certain businesses with possible adverse impacts on sustainability factors. For further information of the Carnegie group’s exclusion policies, please refer to https://www.carnegiegroup.com/about-carnegie/strategic-framework/.
Transparency of remuneration policies in relation to the integration of sustainability risks
The SFDR requires Carnegie to include in remuneration policies information on how those policies are consistent with the integration of sustainability risks.
As Carnegie does not systematically integrate sustainability risk into investment advisory services, we have consequently not included this as a separate factor in the assessment of variable compensation for relevant employees. However, compliance with regulations applicable to Carnegie is always a consideration in the evaluation of variable compensation. Adherence to sustainability regulations, as well as internal procedures related to this (e.g., Carnegie’s ethical guidelines), will be among several factors influencing this assessment.
Sustainability related work in general
Positive contribution
Carnegie’s business model is based on the ability to transform our expertise and knowledge into relevant advisory fostering economic growth for our clients by uniting people, companies, ideas, and capital.
The pursuit of growth and development through a sustainability-driven approach necessitates access to capital for both listed and unlisted companies, as well as other stakeholders. This enables them to remain competitive in an international market characterized by ever-rising expectations regarding accountability and sustainability. Furthermore, investors are increasingly factoring environmental risks into their investment decisions and issuers are aware that they are being evaluated and are expected to meet ESG criteria.
By serving as an effective meeting place for capital and companies, Carnegie can play a role in channeling capital toward companies that prioritize sustainable business models for long-term value creation.
More information of the Carnegie group’s sustainability work and initiatives can be found in the Annual and Sustainability reports, available at: https://www.carnegiegroup.com/financial-reports/
Sustainability risks at entity level
The Carnegie group has broadly defined sustainability risk as the potential for its activities to cause direct or indirect negative impacts in areas such as human rights, labor, environment, corruption, and money laundering. The following main categories of risks have been identified at group level:
- Responsible advisory – Risk that clients, based on advice, guidance, and investment recommendations, will invest in companies that fall short in relation to ethical, environmental or social issues.
- Responsible business – Risk of failure to demonstrate responsible, ethical and transparent business practices in areas such as preventing financial crime, sustainable risk taking and financial soundness. In addition to the risk of suppliers, counterparties and partners not meeting the required ESG standards (as applicable for the group at all times).
- Responsible employer – Risk of failure to maintain a healthy and safe work environment for all employees relating to issues such as professional development, work-life balance, equal opportunity and diversity as well as discrimination and harassment.
- Responsible environment – Risk of disproportionate environmental footprint as a direct impact from the group’s operations, including office energy consumption, business travel, supply chain, waste, etc.
The Carnegie group is currently in the process of implementing procedures for how identified sustainability risks shall be monitored in the short, medium, and long term in order to further explain how the risks can affect the group’s business model and financial results, and whether any changes in established risk management processes are required.