Sustainability risks

Background

Hypoteket Fondförvaltning AB is an AIF-manager under the supervision of Finansinspektionen. As such, according to the Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector (Text with EEA relevance) and additional regulations and directives such as Commission Delegated Regulation (EU) 2021/1255 of 21 April 2021 amending Delegated Regulation (EU) No 231/2013 regarding sustainability risks and sustainability factors to be taken into account by Alternative Investment Fund Managers, we have an obligation to inform investors on potential sustainability related risks in the funds.

Hypoteket Fondförvaltning AB has adopted a sustainability risk policy, describing how Hypoteket Fondförvaltning AB as an AIF-manager integrates sustainability risks in the asset selection process of the various funds the manager oversees. 

Sustainability risks

Hypoteket Fondförvaltning AB is a highly niched asset manager, with the only asset being Swedish Residential Mortgages originated by our sister company Hypoteket Bolån AB. We have identified the below set of sustainability risks for Swedish Residential Mortgages:

• Climate risks such as; flooding (due to extreme preciptation and/or rising sea levels), erosion, landslides, drought (bushfires) and strong winds

• Energy (lack of and/or rising cost of)

• Greenhouse gas emissions

There are also a number of potential social and societal/political risks that could have a negative impact on housing and the housing market, which in turn could do harm to our assets:

• Social unrest and criminality

• Political risks, such as property taxation

• Demographics

• Energy supply and electricity

• Urban planning and construction (too much or too little)

Sustainability risk policy (Due Diligence)

Hypoteket Fondförvaltning AB requires that Hypoteket Bolån AB considers all of the above factors in its credit approval processes as far as possible. For a selection of the sustainability risks such as flooding and energy efficiency, there are specific guidelines in place and data is being gathered.

Neglecting climate related risks could lead to negative consequences as the concentration of high risk property may rise gradually over time, creating increased risk in the asset portfolio. Similarly, neglecting greenhouse gas emissions relating to the housing sector will lower the chance of meeting the net zero targets, while also creating additional risk for both the lender and the borrower as energy efficiency becomes increasingly important for the housing sector.

Our Sustainability Risk Policy can be found in full below (bottom of page).

Principal Adverse Impacts (PAIs) - No consideration of adverse impacts of investments decisions on sustainability factors

The EU Sustainable Finance Disclosure Regulation (“SFDR”) requires the Firm to make a “comply or explain” decision whether to consider the principal adverse impacts (“PAIs”) at entity level, in accordance with a specific regime as outlined in SFDR. The Firm has decided not to comply with that SFDR regime. The Firm is therefore required to publish and maintain on our website a statement to explain our reasons for not complying with the PAI regime in SFDR.

1. Non-compliance with the PAI regime in SFDR

1.1. Hypoteket Fondförvaltning AB (the Firm) has carefully evaluated the requirements of the PAI regime in Article 4 SFDR

1.2. The Firm is supportive of the policy aims of the PAI regime, to improve transparency to clients, investors, and the market, as to how financial market participants integrate consideration of the adverse impacts of their investment decisions on sustainability factors. However, taking account of the Firm's size, we consider that it would be disproportionate to comply with the specific regime in the SFDR.

1.3. In addition, the Firm is also concerned about the lack of reasonably priced / readily available data to comply with many of the technical reporting requirements of the PAI regime, as we believe that issuers and market data providers are not yet ready to make available all necessary data for the PAI regime. However, changes in this regard seem to be underway and we expect to be able to report on PAIs no later than for FY 2025.

1.4. The Firm will keep its decision not to comply with the PAI regime under regular review.

Updated December 2023

Sustainability risks and Remuneration

Sustainability risk are an integrated part of the Hypoteket Fondförvaltning AB Remuneration Policy. You find it by clicking the below button.