France publishes methodology for new government-backed SRI label

France has formally published the methodology that asset managers will have to follow for certification under the country’s new government-sponsored SRI label, as well as the surveillance and oversight remit for the label providers that will rate and audit funds.
The criteria were published by the country’s National Assembly and will be overseen by the Ministry of Finance. They come into force immediately.
RI reported in October 2015 that Michel Sapin, the French Minister of Finance and Public Accounts, had announced that the government would back the new public SRI quality label for investment funds, with the first kite-marks expected in Q1, 2016. It is believed to be the first time a government has publicly backed a national SRI standard. The French move could have a significant knock-on effect on global public interest in the sustainability of investment funds.
Indeed, RI reported earlier this month that a report prepared for the European Commission had called for institutional investors to be obliged to disclose their responsible and sustainable investment policies on a comply or explain basis.
The Commission has also launched a public consultation on how institutional investors factor in long-termism and environmental, social and governance (ESG) information into investment decisions, which runs to March 25, and will be used by the Commission to “assess the state of play in this field”.
The new French text says that companies that want to be SRI label certifiers have to apply for accreditation to Cofrac, France’s state-funded, not-for-profit accreditation agency. A label certifier may label funds if it has formally applied for accreditation. Existing label providers such as Novethic and Afnor, are expected to be the first to apply, although observers believe others could follow from amongst SRI research providers.To obtain an SRI label, asset managers ask a chosen label certifier to verify their SRI approach based on an information sheet they have to provide that meets the requirements of the decree and its internal audit procedures. Asset managers can obtain one or more SRI labels for their portfolios.
Once a label provider accredits a fund, the label lasts for 3 years and the Ministry of Finance is informed.
Label providers will have to audit accredited fund companies according to a ‘surveillance and control plan’, details of which have yet to be published.
During the audit the label provider can ask the asset manager or investor to define and put in place, in an agreed timeframe, an action plan offering corrective measures, notably when non-conformity to the government methodology are detected. The label provider then ensures the necessary modifications have been executed, and can pronounce the suspension or the removal of the label if necessary. Label providers are not allowed to publish confidential information provided by asset managers unless the exchange of information with another label provider is necessary to the audit.
The AMF French regulator will not be implicated in the governance of the SRI label but will verify the coherence of the transparency codes of label providers.
France has launched both green and SRI fund labels in recent months as well as new rules on environmental/ESG reporting for investors, which have come into force hard on the heels of the COP21 climate conference.
The green funds label is being overseen by Ségolène Royal, the Minister of Ecology, Sustainable Development and Energy and certifies investment funds that are deemed to be promoting the clean energy transition. Link to RI story
The law on environmental/ESG reporting – informally know as Article 173- requires investors in France to report information on how they integrate ESG into their investment processes, outline the greenhouse gas (GHG) emissions of their investments and contribute to the financing of a low carbon economy: Link to RI story
To link to the French decree (in French only) click here