Fossil fuel exclusions and requirements around Paris-aligned transition plans will form the basis of a new SRI fund label being outlined by the French government on Tuesday, ahead of the full release of the framework later this month.
The proposed label will require funds to exclude investments in companies linked to coal and other unconventional hydrocarbons, as well as those involved in new oil and gas projects.
In addition, there will be a requirement for Paris-aligned transition plans, according to the announcement. At the time of writing, a spokesperson had not replied to a request from Responsible Investor for more details around the transition plan requirement.
Responding to the announcement, Philippe Zaouati – CEO of French sustainable investment house Mirova, who has been critical of the work on the SRI label – congratulated the committee working on it “for having managed to move in this direction despite the pressure”.
“The SRI label is going to become a label with a strong exclusion of the fossil fuel sector, which should lead to a significant reduction in the number of labelled funds or a major change in the management of these funds,” he wrote on LinkedIn. “This in no way detracts from the other criticisms I have levelled at the label, but let’s be honest, they have now taken a back seat.”
France’s SRI label was created in 2016 and has not been significantly revised since then.
According to figures released by France’s Ministry of Economics and Finance, there are 1,174 funds with the SRI label, representing around €773 billion in assets. SRI label status is given to a fund after a review by an independent body.
The review process was kickstarted in October 2021, when the French Minister of the Economy and Finance, Bruno Le Maire, announced plans to create a more “demanding” framework for fund designation, with more stringent climate criteria at the centre of proposals to update the initiative.
The government also appointed a committee to oversee the work on the SRI label, led by Michèle Pappalardo, former president of France’s environmental body ADEME.
Since the review, there have been two consultations on the SRI label. The most recent closed in June, attracting a total of 53 responses on the proposed framework.
French investors and climate groups responding to the most recent outreach called for the proposed label to be more explicitly linked to EU sustainable finance regulation.
In its response to the consultation, Mirova called for more explicit links to EU anti-greenwashing regulation SFDR and the taxonomy, adding that “all funds applying for the label should be classified as Article 8 or 9”.
Following the second consultation, the committee submitted its final proposal in the summer.
The label, which will come into force in March 2024, will also include ESG criteria, with a focus on limiting negative impacts.