Sweden’s Riksbank has released the sustainability criteria for its corporate bond purchases as part of the bank’s quantitative easing programme.
The move follows last November’s Executive Board decision to weaken the controversial principle of market neutrality. Instead, the bank adopted norm-based negative screening in which only bonds issued by companies complying with international sustainability standards are eligible for purchase.
That decision came into effect on January 1 2021 and the new criteria describe the background, the underlying legislation and the international norms on which the negative screening is based.
The Riksbank has engaged an external service provider, Sustainalytics, to carry out sustainability assessments based on the principles of a number of international frameworks. These include the UN Global Compact, the OECD Guidelines for Multinational Enterprises, and the UN Guiding Principles on Business and Human Rights.
These international standards span the areas of human rights, labour conditions, environment and anti-corruption and were chosen because they are “well known and universally accepted” and together are “judged to be a good reflection of the state’s core values”.
The UN Global Compact requires participating companies to “act to attain the UN’s objectives regarding the 2030 agenda and the 17 sustainable development goals,” including climate change. However the Riksbank emphasised that it will make its own assessments based on the Sustainalytics work, and that it is bound by public law principles requiring equality of treatment unless on objective grounds.
In addition, the positive effects of a decision to exclude a company must be in reasonable proportion to the potential damage the measure can cause. Sustainability considerations must also aim to avoid distortion effects on the Swedish corporate bond market. There are many caveats.
The Riksbank’s move towards greening its asset purchases comes amid debate within the European Central Bank (ECB) about greening its own monetary operations as it prepares for the release of its first major strategy review since 2003.
Research has shown a substantial carbon bias in both the ECB’s corporate sector purchase programme and in its collateral framework, and there are growing calls for the bank to actively align its monetary policy operations with the targets of the Paris Agreement.
This page was last updated April 23, 2021
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