French government mulls tighter rules for SRI funds

Note: The figures in paragraph 12 of this article were corrected after publication. 

The French Government looks set to tighten rules for funds wishing to secure an official SRI label, and will appoint an organisation to host the label. 

The move follows a review of the label led by Nicola Notat, the founder of Vigeo Eiris, which found the requirements for the label should be strengthened to meet the expectations of savers and investors. 

Anne-Catherine Husson-Traore, CEO of French research house Novethic said: "This report, with its caustic tone, is a pleasant surprise. It does not hesitate to highlight the shortcomings of the SRI label, which has not moved since 2016 while the landscape of sustainable finance has been completely transformed by the EU Sustainable Finance Action Plan. It explains that it is necessary to completely overhaul the governance of the label to enable it to keep up with these developments. This is the second good news."

She added that "the competition for the European leadership in sustainable finance is increasingly tough". 

As of March 8, 2021, there were 690 funds with the official French SRI label, managing nearly €470bn. 

Grégoire Cousté, Managing Director at the FrenchSIF, the country’s responsible investment network, said it and others had pushed for updates to the SRI label.

“It was designed four years ago and so there is a need for change especially considering what’s happening in Europe,” he told RI, adding that he hopes the French government will merge the label, housed in the Ministry Finance, with its green finance label (Greenfin), housed in the Ministry of Transition. 

“It would be a good idea to have one label and you could have a scale to signal the impact of the product.”

Cousté said this would improve conversations with financial advisors on products around the risk and impact of SRI and green products. 

French law requires all life insurance distributors to offer investors at least one labelled fund – SRI, GreenFin or Finansol (a label for social finance investments).

According to French research group Novethic, SRI-labelled funds account for more than half of the sustainable funds distributed to French savers and two-thirds of assets under management, it said. 

The SRI fund nearly doubled its fund over a year from 321 SRI-labelled funds in December 2019 to 651 SRI-labelled funds in December 2020. The Greenfin label had 29 funds at December 2020 compared to 19 at December 2019. 

A consultation is now underway on the criteria for the SRI Label. 

Elsewhere in Europe, the working group helping to develop the EU’s ‘ecolabel’ for retail investment products released its latest proposals on Friday, outlining plans for the scheme’s eligibility criteria. RI has reported on the proposed criteria here. Member states will decide whether to adopt the proposed criteria and launch the new Ecolabel scheme at a vote in June.