German sustainable fund label saved but SIF issues unresolved

Members approve new governance structure for FNG Label at heated AGM but elections for new FNG board and other issues delayed until 2024.

life preserver floating on the sea

The future of Germany’s sustainable fund label looks more secure after a tense member meeting at its parent organisation, the Forum Nachhaltige Geldanlagen (FNG), but board elections at the embattled industry group have been delayed until next year.

Members of the FNG – Germany’s SIF – voted in favour of a proposal to grant its labelling arm greater independence at a marathon annual meeting on Wednesday, after disputes over funding left its financial future uncertain.

Under the proposals, the organisations carrying out the assessments for the label will pay the FNG a licensing fee but in return will be at arm’s length from the group. They will also get greater control over the FNG Label’s development.

Previously, the label had a complicated corporate structure.

Broad responsibility for its management rested with FNG subsidiary QNG, which is headed by managing director Roland Kölsch.

Assessments were originally carried out by a team at the University of Hamburg’s sustainable finance research group, but as the label grew in popularity these efforts were spun out into two separate organisations.

Fund assessments are now carried out by analysts at Advanced Impact Research (AIR) in conjunction with prominent German sustainable finance academics, under the aegis of non-profit FIRST.

Under the reforms Kölsch will join FIRST, although his role has yet to be decided.

Timo Busch, a professor at the University of Hamburg who originally headed the label assessments and is chairman of FIRST, responsible for the label’s scientific development, told Responsible Investor that he was looking forward to a “constructive collaboration and mutual effort in terms of developing the label further”.

“The FNG still owns the label but at FIRST we will be fully in charge of doing the label. That means we can alter and further develop the label as required.”

Previously, the FNG itself and a committee had been in charge of setting the criteria. Busch said that the newfound freedom meant the label would be viewed as more independent from the FNG.

Asked about the future direction of the label, Busch said he sees a need to develop it in line with market and regulatory developments. This could involve better incorporating impact, or looking into providing third-party verification for fund labels under prospective SFDR reforms.

Due to uncertainty over its financial future, AIR had pre-emptively made its researchers redundant. Busch said it is now in conversations over re-hiring the team, and while some have already found new positions he was confident that others would return.

While the FNG Label appears to have been saved, the situation at the FNG itself has yet to be resolved.

After a long and tense member’s meeting, which lasted at least eight hours, many of the challenges facing the FNG remained unclear. New board elections and a vote on a controversial proposal to reform the FNG’s governance will be voted on next year.

A decision on the ultimate fate of Ingeborg Schumacher, a board member who was thrown out of the FNG shortly before the meeting, has also been deferred.

In a statement published on Friday, FNG CEO Sascha Görlitz said “the member meeting is the most important instrument in our association. It now falls to us to put in to place the decisions of our members”.