SWEDEN Trends and Developments Contributed by: Richard Engblom, Per Josephson, Anna Cumzelius and Amin Bell, Harvest Advokatbyrå
while new regulations are complex, this should not prevent companies from taking action on existing requirements. Also, in September 2024, as part of a common supervisory activity initiated by ESMA, the SFSA initiated in-depth analysis focusing on how Swedish banks and investment firms take consumers’ preferences on sustain - ability into account when providing investment advice and portfolio management. Furthermore, in June 2024, the SFSA announced that it is conducting an in-depth analysis of how larger credit institutions disclose sustainability risk information, following the EBA 2022 require - ments for standardised reporting. The analysis focuses on seven Swedish institutions that have issued securities in public markets, examining both their annual reports and Pillar 3 report - ing under capital adequacy regulations, which includes standardised templates for metrics like the Green Asset Ratio (GAR). While the imple - mentation of these templates is being phased in through 2024, with the first supervisory reporting due in June 2024, the SFSA’s analysis aims to assess how this sustainability information can be systematically used in supervision and verify consistency across different reporting channels. Although this internal analysis will not involve direct communication with supervised entities, findings will be shared individually with affected banks through supervisory dialogue, with the possibility of public reporting if the conclusions are deemed of general interest. The SFSA has also identified climate transition risks in Swedish banks’ loan portfolios through an analysis matching banks’ lending to individu - al companies with emissions data from compa - nies participating in the EU’s Emissions Trading System (EU ETS). While the analysis shows that banks’ overall lending to companies in the EU ETS is limited, the SFSA has emphasised that
banks need to continue incorporating climate risks into their risk management and lending practices for financial stability. The study, which used the Swedish Central Bank’s ( Riksbanken ) credit database and EU ETS data, acknowledg - es its limitations due to restricted data availabil - ity and suggests that total transition risks are likely higher than indicated, prompting the SFSA to follow up with affected banks and incorporate findings into future reviews of banks’ transition plans. The Corporate Sustainability Reporting Directive A major regulatory cloud on the horizon, not only for financial institutions, is the Corporate Sus - tainability Reporting Directive (the CSRD). This directive initially applies to large listed compa - nies. Subsequently, all other large companies and, eventually, all listed companies, barring micro-cap companies, will be brought under its purview in the coming years. However, the Swedish implementation of the directive was delayed and the national rules started applying from 1 July 2024 instead of 1 January 2024. As a consequence, most large listed companies (depending on the financial year) that are first to report will not have to do so until 2026, for the financial year of 2025. The CSRD will impose comprehensive stand - ardised sustainability reporting obligations in accordance with the European Sustainabil - ity Reporting Standards (the ESRS) developed by the European Financial Reporting Advisory Group (EFRAG). The ESRS will include twelve general (two cross-cutting and ten topical stand - ards relating to environmental, social and gov - ernance) and 41 sector-specific standards. The directive’s broad scope means that even entities not immediately subject to these requirements – notably, businesses other than large listed
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