French authorities boost SRI with double label launch

The French government has started to grant its TEEC label to investment funds supporting energy transition while another public SRI label is on the way.

In May, the Sycomore Eco Solutions fund became the first strategy ever labelled by the French government when it was awarded the TEEC label (Transition énergétique et écologique pour le climat) that distinguishes funds backing energy transition and that respect a certain number of additional financial criteria.

The environmental impact fund relies on a large exclusion spectrum, selective SRI filters and stock-picking based on traditional financial metrics as well as environmental impact.

Prior to obtaining the label, Sycomore Eco Solutions was audited by SRI research centre Novethic, a branch of French public savings institution Caisse des Dépôts. EY France has also been mandated to assess candidate funds.

Six other strategies are to obtain the label by the end of the year.

DOUBLE LAUNCH
It is not one, but two labels French authorities will award – an SRI label, launched earlier this year, will soon be granted to investment funds.

Interestingly, that double label launch comes at a moment when French ESG assets have hit a record (€746bn in 2015 according to Novethic, a figure that continually grows).

Sycomore Asset Management supports the French government’s “efforts to communicate more widely on responsible investing”.

“The SRI label aims at acknowledging asset managers that intend to deliver environmental and social impact. In order to build a sustainable future and tackle the degradation of ecosystem services, such as providing a stable and resilient climate, we strongly believe that all stakeholders should cooperate.

“In this context, the highly demanding specifications of the TEEC label are positive, as was the pioneering role of Novethic in creating the Novethic SRI label and the Green label several years ago,” Sycomore Asset Management underlines.

Generali Investments welcomes the public SRI label sponsored by the French government “as a valuable third-party recognition of the soundness of an SRI approach and one of the first steps towards a pan-European certification.”

The firm says it looks forward to the outcome of the first round of certifications, expected in September.

RESTRICTIVE
SRI boutique Cedrus Asset Management also welcomes the government’s initiative as it would any other promoting responsible investments.

Its head of Fund Selection and Asset Allocation Edmond Schaff observes, however, that the framework of the TEEC label appears too restrictive as to be labelled, funds must invest at least 75% of their assets in EU based companies whose activity contributes to energy transition.

“All this results in a much reduced investment universe that may limit the number of candidates for the label,” Schaff points out, adding that he does not believe the two labels will reduce the diversity of SRI approaches.

“We do not believe these labels will bring a norm to SRI funds. Firstly because some existing labels such as that of Novethic have not led to a normalisation. Secondly, the SRI label is not very prescriptive and gives flexibility to managers in the way they address SRI issues. Lastly, these labels will remain local and their scope does not cross the borders,” Schaff argues.

Is it a government’s role to award labels to investment funds? Schaff replies that does not represent an issue to Cedrus AM, recalling that funds are being audited independently from the government and that steering committees, to which all parties may contribute, are being set up.

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