Why do we use ethanol in SN2 reaction?
Usually, nucleophilic substitution reactions of anionic nucleophiles occur more rapidly in polar aprotic solvents. In such solvents (e.g. DMSO) the typical relative reactivity order is
$$ \ce{SCN-} &lt; \ce{I-} &lt; \ce{Br-} &lt; \ce{Cl-} &lt; \ce{F-}$$

In protic hydrogen-bonding solvents (e.g. ethanol), anions are solvated. Therefore, the reactivity of nucleophiles is decreased. Since hard nucleophiles are more strongly solvated than soft nucleophiles, the relative reactivity of soft anions is increased in such solvents. The typical relative reactivity order is
$$ \ce{F-} &lt; \ce{Cl-} &lt; \ce{Br-} &lt; \ce{I-} &lt; \ce{SCN-}$$

In the given example, $\ce{-Cl}$ shall be replaced by $\ce{-I}$; and in alcohols, the nucleophilicity of $\ce{I-}$ is higher than the nucleophilicity of $\ce{Cl-}$.