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Institution / Government

Exclusive: Sweden’s financial markets minister on leading by green example

The Nordic country is a pioneer in carbon taxation and a leader in green bond issuance. Åsa Lindhagen speaks to Capital Monitor about the country's green policies and fostering sustainable development.

Åsa Lindhagen, Sweden’s financial markets minister, says it is not possible to continue living the way we do now. (Photo: Kristian Pohl/Swedish government offices)

  • Sweden shows reducing emissions and growing economically can be done with the right policies, says financial markets minister Åsa Lindhagen.
  • The country has a carbon tax with the highest price globally, which she says makes companies more competitive by reducing their climate-related risks.
  • Sweden represents a useful case study on this as COP26 approaches, but waiting for international agreement is no excuse for inaction, she adds.

Sweden, like the Nordic region as a whole, has long been held up as a pioneer of sustainability. With low poverty, high levels of health and well-being, and affordable and clean energy, the country regularly ranks highly – and sometimes at the top – in sustainable development studies.

It is also home to one of the most successful climate activists, Greta Thunberg. The teenager’s Fridays for Future movement has been hugely successful in bringing people’s attention to the climate crisis globally, says Åsa Lindhagen, who was named Sweden’s financial markets minister in February.

“That pressure on governments around the world is so, so important. It makes it much easier to introduce green reforms,” she says during a call with Capital Monitor last week.

Lindhagen represents the minority Green Party in a coalition with the Social Democrats in a country that established itself as an environmental, social and governance (ESG) leader long before the term entered common parlance. That has been no accident: successive governments have made tackling the climate crisis a key priority.

Crucially, the economy has also continued to grow as emissions have fallen (see chart below). “Sweden is proof that it’s possible to transition to a more sustainable economy and continue to create jobs, if governments do it in a responsible way,” says Lindhagen, who oversees policy for financial services.

“It’s not possible to continue living the way we do – we know that now. We need to stay within the limits of the planet and continue to embrace concepts like the circular economy.” The latter, she argues, is possible.

Green finance leadership

The financial sector has been a key player in Sweden’s sustainable development, Lindhagen adds. Like those elsewhere, its sustainable finance industry is growing fast, comprising half ($43.4bn) of total green finance volumes in the Nordics as of the end of last year (see chart below). The region has recorded $88.2bn of green, social and sustainable bond issuance, 5% of the global total, while representing just 0.3% of the world’s population and economy, according to the Climate Bonds Initiative.

“Money is power – how we direct capital plays a huge role in the mission to reach net-zero emissions,” says Lindhagen. “Investors that are not taking into account the climate crisis are taking great risks – though there are challenges preventing them from doing that right now.”


Governments and regulators have plenty to do to make it easier for financial markets to assist in the transition. The two major challenges right now are related: the lack of common definitions for what is sustainable, and sustainability reporting standards for corporates. These are both inextricably linked and, when resolved, will help investors take a more active role in the transition. But waiting for these is no excuse for inaction now.

The European Commission’s work on the sustainable taxonomy will go a long way to resolving the first point. And there are various initiatives that will help address the second, such as the Sustainable Finance Disclosure Regulation, the Corporate Sustainability Reporting Directive, standards created by the International Financial Reporting Standards Foundation and the roll-out of Taskforce on Climate-related Financial Disclosures standards.

All these frameworks face their own issues. Some areas of the taxonomy have been met with fierce opposition from member states, and the push for more disclosure around sustainability has plenty of critics.

And there are many, such as ex-BlackRock sustainable investment chief Tariq Fancy, who argue that financial services are hindering rather than helping the push for net zero and other key ESG-related goals.

But Lindhagen is confident of a positive outcome. “It’s much easier to talk about the taxonomy than actually create it – the Commission’s job is not easy – but I’m convinced we will get there,” she says. “More and more politicians are realising that the climate crisis is real, and that the financial sector has to play a key role. Compared to just a few years ago, there was not the same awareness of how these two are connected.”

Carbon tax pioneer

Policy tools, including taxes and levies, have been essential to Sweden’s success in building a sustainable economy. The nation was among the first globally – after neighbouring Finland – to introduce a carbon tax, in 1991. And while it only covers around 40% of national greenhouse gas emissions, it sets the highest carbon price per tonne in the world, at SKr1,200 ($136).

Introducing it was a challenge, and there is still resistance. Yet studies have shown that Swedes’ generally high levels of trust in government made it easier than in other countries such as France. The latter famously abandoned an attempt at raising the price of carbon in 2018.

Swedish companies are also part of the EU’s emissions 'cap and trade' scheme and are encouraged to use a higher carbon price in their internal modelling, to prepare them for future price increases.

International cooperation on the price of carbon would be very welcome, but we cannot wait for this before we act. Åsa Lindhagen, Financial markets minister for Sweden

The country’s long history of carbon taxation puts it in a position to show leadership on the world stage – notably at the upcoming COP26 climate talks in Glasgow. An international agreement on carbon markets is the last piece of the Paris Agreement to be resolved, and some believe the topic is a make-or-break one for the summit.

International cooperation on the price of carbon would be very welcome, but we cannot wait for this before we act,” says Lindhagen. “It can’t become an excuse for inaction, or something we hide behind.

Putting a price on carbon is an effective way of putting pressure on companies to be an active part of the transition – and that is, in many ways, good for big companies in Sweden. It makes them more competitive, and it’s better for our economy in the long term.”

After all, climate risk is fundamentally a financial risk, Lindhagen says. There are two main risks posed by the climate crisis: physical (the cost of floods, droughts, heatwaves and fires) and transition (the cost of not responding to climate change via policy or shifting towards more sustainable practices).

Because of Sweden’s triple-digit carbon tax, its companies are in theory less exposed to what the IMF calls the inevitable policy response. Its theory is that the physical consequences of climate change will eventually force the hand of governments, giving them no choice but to introduce decisive and possibly chaotic policy changes.

Lindhagen also believes this makes Swedish companies more innovative in respect of climate solutions. She cites a Swedish joint venture between government-owned utility LKAB and private company SSAB that produced the first carbon-neutral steel earlier this year.

She hopes other governments will look to the example set by Sweden to face down local resistance and introduce a carbon tax, whether an international agreement is reached or not.

“You can’t tell others to do something without doing it yourself first,” Lindhagen says. “You need the political will and to know how to do it, of course. But we can show other countries that it is possible.”

Sweden has certainly shown that many of the arguments against imposing a carbon tax hold little water. That, unfortunately, will not make an international pricing framework politically any easier to push through. Investors are keen to see that happen at COP26, but will likely not be holding their breath.

Elizabeth Meager

Policy editor

Elizabeth Meager is the policy editor of Capital Monitor, a position dedicated to making sense of the slew of investment and corporate regulatory changes surrounding sustainability.