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More and more savers want to give meaning to their savings and finance professionals have understood this well by multiplying the investment vehicles of responsible finance, recognizable thanks to their label, and in particular the SRI label, which has already been present in the savings panorama for many years in France. For example, by the Pacte law, it was mandatory among the unit-linked holders of life insurance contracts, this investment preferred by the French.
The SRI label has largely conquered the French. In 2022? more than 1,000 SRI-labeled funds have been offered to the general public. While a major reform of the SRI label is planned for next summer, is it relevant to invest through this label in 2023? What are the benefits of the SRI label? What are the limits of this reform? Will the individual investor come out on top? All our explanations.
Socially responsible investment: review of the SRI label by Bercy
Created in 2016 by the Ministry of Economy and Finance, the SRI brand allows savers to easily identify funds that comply with the principles of socially responsible investment. Since its creation, the SRI label can apply to all collective management vehicles (ETFs, classic OMPCVMs) but also from 2020 real estate funds such as SCPI, OPCI or SCI. From the same year, the SRI brand can also be applied to institutional mandates.
Since 2021, a new governance has been established whose mission is to allow the SRI label “to adapt to the new expectations of savers and investors and to remain an important tool for directing savings towards the financing of ‘a sustainable economy’. The State , which owns the SRI brand, and is therefore the sole decision maker regarding the evolutions of the brand, has planned a major reform in the summer of 2023.
However, there is also at European level the will to make sustainable finance more accessible and transparent through the SFDR (Sustainable Finance Disclosure Regulation) and in particular its article 9 which designates products with a sustainable investment objective, i.e. , who invest in an economic activity that contributes to an environmental and/or social objective. Even this article 9, which remains very evasive on the very definition of sustainable investment, poses a problem as it can lend itself to multiple interpretations. Furthermore, the inclusion of Article 9 in this category is based solely on a self-assessment by the fund managers.
Responsible finance: the new SRI label hunts down greenwashing
Greenwashing is a real problem for sustainable finance, which sometimes lacks credibility despite the existence of various national or European reference labels. It is regrettable that funds marked with sustainable finance are invested in fossil fuels, nuclear energy or armaments and/or in companies that do not have a clear policy in terms of ESG criteria.
The SRI label aims to be more demanding than the SFDR with a dual objective: to limit greenwashing and to guarantee the label’s credibility. This is already the case today as the labeling process for the SRI label corresponds to quite precise specifications, with 6 categories of requirements, and where the certifications are issued by a third party as three independent bodies certified by the French Accreditation Committee issue: Afnor Certification, EY France and Deloitte. However, there may have been abuses, reported in 2021 by the Inspectorate General of Finance.
It is in this context that the major SRI brand reform scheduled for 2023 will kick off, which will make it more difficult to obtain the precious brand as many additional measures will come into force, in particular:
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applicants for the label will have to submit a concrete action plan to reduce their greenhouse gas emissions;
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companies in the fossil fuel and coal sector will be excluded;
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indicators will need to be in place to measure the real impact of portfolios on social, environmental and good governance issues.
This reform should make it possible to offer savers a more reliable and better monitored label with a “precise and demanding reference system”, according to Michèle Pappalardo, President of the SRI Label Committee who confided in December 2022 to AGEFI: “the great interest of the ISR label serves to avoid the pitfalls associated with SFDR”.
Socially responsible investment: an increasingly restrictive millefeuille-shaped label
If the reform of the SRI label which should come into force in the summer of 2023 seems to us to be a good omen for savers who will be able to invest with confidence in this label, being almost certain that their money will be placed in virtuous funds, in compliance with ESG criteria, this reform is not necessarily viewed favorably by finance professionals, who rightly have many reservations. Indeed, reform is indispensable and its goal laudable. However, we can regret the excessive rigidity of the device. How about supporting companies that need to be taken by the hand more than when faced with unrealistic goals?
Some measures may even prove counterproductive, particularly with regard to exclusions. For example, on the subject of CO2 emissions or compliance with ESG criteria, rather than imposing a priori exclusions, perhaps it would have been better to encourage companies to change their model? Or even encourage management companies to encourage companies to change their model by promoting shareholder engagement. It is in this spirit that several management companies, including Meeschaert Amilton and La Financière de l’Échiquier, have asked the Total group to comply with the Paris climate agreement.
However, we believe it is important to welcome the establishment of a ‘layered brand’ with a basic foundation and several optional levels of requirements which allows offering a clear reading grid for savers, supporting whole companies towards a more sustainable.