SRI Label

The SRI Label aims to increase the recognition of Socially Responsible Funds (SRIs) for savers, and to ensure that various extra-financial objectives are actively managed by the funds, in the areas of environment, Society and governance

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Generalities

Label SRI Label
Nationality France - French/English
Management Label issued by the French Ministry of Economy and Finance
Label Type SRI
Website https://www.lelabelisr.fr/label-isr/
Market The label is open to mutual funds (including funds of funds and real estate funds) and management mandates.
Products 1075 funds and products at the end of June 2022
Links to funds https://www.lelabelisr.fr/comment-investir/fonds-labellises/
Criteria https://www.lelabelisr.fr/wp-content/uploads/210830-Liste-fonds-label-ISR.xlsx
Periodicity 3 years with verification of requirements every year

Detail data

Description The SRI Label aims to increase the recognition of Socially Responsible Funds (SRIs) for savers, and to ensure that extra-financial factors related to the environment, Society and governance are actively managed by the labeled funds
Genesis and development The SRI Label was born in 2016 behind a public initiative consequent to a request from French financial actors. The Ministry owns the Label, which it manages with a highly structured process. An initial version of the Label "v1" was in effect until October 2020, after which funds must have adjusted their investment process to meet the current criteria (v2).
Goals The complexity of SRI issues has led public authorities to favor a delegated approach, requiring products to comply with a set of organizational principles and thus providing reassurance to investors that the Label meets the key criteria of intentionality of management and performance monitoring to be considered effectively an "SRI fund."
Promoters and administrators The SRI Label, desired by the Ministry of Finance, relies on a "Label Committee" comprising 12 experts from Society civil (trade unionists, managers, academics...), and a 4-member Scientific Committee (academics) that define the mandatory and optional requirements. It is then administered by three independent certifying bodies pinned by the national body that manages accreditations (COFRAC), which decide on the eligibility of candidates independently, based on established audit criteria.
SRI Approach There are 6 pillars: 1) transparent ESG goals; 2) a strategy and system for overseeing the goals; 3) clear integration into the investment process; 4) an "engagement" strategy toward investment in Portfolio; 5) transparent communication of results; and 6) constant monitoring of ESG performance and positive impacts achieved
Mandatory Criteria ESG objectives must be clearly expressed in the prospectus and marketing materials, and ESG assessments must be clearly linked to the investment process, and conducted by qualified resources; traceability of ESG results is ensured over time on at least 90 percent of Portfolio, and financial techniques exclude speculative approaches. The fund implements an active engagement policy at Society in Portfolio. Transparency to investors is ensured
Additional criteria There are no real optional criteria: the fund has wide discretion of action in defining ESG strategies, but it must ensure close oversight of the objectives, strategy, measures and results on the economy, and apply the specific requirements related to each strategy (Best-in-class, derivatives, engagement policy, enhanced transparency ...).
Allocation process Society who want to obtain the label must join the Promotion Body, and demonstrate that they meet the eligibility criteria. The application is first reviewed by an accredited certifying body (AFNOR Certification, Deloitte, EY France) who check the requirements and prepare an audit report, and make an independent decision to award the label. They subsequently inform the French Ministry of Finance. A public body specializing in accreditation, COFRAC, provides the Ministry with qualified support in the selection and due diligence of accredited entities that award the label.
External certification The SRI Label includes a detailed audit protocol and an annual review of both performance against expectations and the funds' ESG organization
Focus on transparency There is enhanced transparency to both the label and investors, who should be able to easily read ESG goals, achievements through annual reports made available to investors.
Focus on periodic checks The annual audit process by the accredited body aims to verify both ESG management processes, investment processes, and monitoring of results as well as impact on the economy.
Related parties The management mechanism is largely delegated by the Ministry of Finance to competent third parties: the COFRAC to adjudicate Audit instructions and qualify candidates for accreditation, and accredited bodies specializing in Audit and quality assurance (EY France, Afnor Certification, Deloitte)