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Alternative Market Briefing

Other Voices: Responsible Investment labels: welcome to the jungle!

Thursday, October 15, 2020

by Perrine Dutronc, Sustainable Investing Specialist, Groupe La Française

There is no common definition of "sustainable finance", which leaves ample room for interpretation when referencing sustainable investments.

Sustainable investment strategies can be based on environmental or social themes like climate change or human capital, exclusions based, best in class, best in progress or future potential progress…

Sustainable investments can also differ largely in terms of objective and allocation. Amidst the variety of terminology: sustainable, responsible, SRI (Socially Responsible Investing), ESG (Environmental, Social, Governance), green, climate, eco, transition, most investors are ill-equipped to understand the growing responsible investment offer.

Labels have been developed to answer that lack of clarity and make sustainable financial products easier to understand. They attest to the quality of the process.

But labels cannot streamline what is already fragmented. Moreover, they are viewed as a tool to influence standards, regulations and potentially a future European ecolabel. Many EU countries are now racing to be at the forefront, so they can impose their view of responsible or green investments and set the standard.

Across Europe, we have inventoried no less than nine different labels and 800 labelled funds in a total universe of 60,000 funds (as at Dec. 31, 2019). Though that represents just 1% of the total market, the number of l......................

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