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In order to set a quality standard for sustainable and socially responsible financial products, several labels have been created since the 2000s, with the launch by certain asset management companies of investment funds qualified as "SRI funds".
The existence of these labels is essential in the current context of new regulations in the sustainable finance sector (SFDR, LEC, MIFID, etc.). Indeed, the mass of information made available to investors as a result of these regulations is far from easy to master. Labels, on the other hand, are designed to communicate information, and their recognition on the market makes them highly relevant tools for facilitating investment decisions.
However, there has been some criticism of the labels, particularly with regard to the level of requirements applied. They focus on the environmental and social characteristics of the funds and on the investment process, but do not at the outset carry out any checks on the achievement of the sustainable investment objectives presented and the results.
In order to reassess these criteria, the Toward Sustainability Label and the SRI Label have been reviewed and new proposals have been made.
This study focuses on the latest developments in these two labels, comparing them in terms of their level of requirements.
Ahead of the study, the positioning of the two labels seems different: the Toward Sustainability label "does not claim to define the strictest sustainability product, but recognizes the evolving and ambitious nature of sustainability". Whereas the SRI label aims to "enable savers [...] to distinguish investment funds implementing a robust socially responsible investment (SRI) methodology , leading to measurable and concrete results."
The SRI label seems to be positioning itself more firmly than the Belgian label.
The Toward Sustainability Label was created in 2019 by Febelfin, the association of Belgian financial players, to set a quality standard for sustainable and socially responsible financial products following the example of its French counterpart, the SRI label.
The French SRI label, for its part, was created in 2016 by the French Ministry of the Economy and Finance, and today includes 1,174 label-labeled funds, compared with 792 for the Belgian label. SRI-labeled funds remain so for 3 years, while the Toward Sustainability label is awarded for only 1 year (renewable in both cases).
The labels are revised regularly (every 2 years or so), for the Toward Sustainability label the 2023 revision took place from November 2022 to June 2023, the consultation for the SRI label took place in April 2023 and the latest proposal was published on July 17, 2023 (the SRI label is in its third version since its creation).
The new criteria should apply from 01/01/2024 for both labels, with an extended transition period (up to 6 months) for funds already awarded the label.
These revisions raise the level of ambition of the labels with regard to :
Additional transparency is requested on :
This study focuses on the latest developments in the two labels (SRI and Toward Sustainability), comparing them in terms of their requirements.
As the areas of development are very similar for both labels, they have been grouped around the pillars of fund analysis for the award of the labels.
ESG Connect functionalities meet 100% of the new requirements of the SRI label. Only the shareholder engagement module is not currently present on the platform, but is scheduled for development in Q4 2023 and therefore available when the new rules come into force.
You can find details of ESG Connect functionalities concerning changes in SRI Label regulations in the table below.
