Another question lies in the impact of these labels on investor demand and whether they will really help investors to select an SRI fund.
Olivier Bonnet (pictured), head of Asset Manager Selection at French public pension fund ERAFP, notes that the SRI market in France is mainly driven by institutional investors as retail investors only account for 23% of the market, according to Novethic figures for 2015.
“Several elements may explain this reluctance among retail investors: the complexity of the SRI approaches implemented within the funds, the relatively low level of awareness of retail financial advisers on these issues and the lack of robust indicators that might inform on the positive impact on the environment or on society of the SRI approach implemented.
“With that in mind the French government developed this label in order to reinforce the confidence of retail investors and institutional investors with low experience of the SRI funds they might be willing to invest in.”
However, according to Schaff, institutional investors may not be persuaded; those already involved in SRI and using their own SRI approach will follow their path without considering the labels.
Others that are less engaged might use these labels to show their interest in SRI-related topics, Schaff believes.
As for retail investors, the impact of the labels will depend on the way they have been promoted. “We do not have enough visibility on that for the moment,” he highlights.
Sycomore AM believes that, considering the current level of confusion around responsible investing, having a single label will raise awareness and increase the level of understanding of SRI products among the wider public.
The firm assesses that the initiative can succeed if the communication around it is clear, active and consistent.
Would French fund selectors take these labels into account in their selection?
Bonnet says ERAFP, which manages €24bn in assets, mainly invests through segregated accounts. Managers are selected via public tenders and the French public pension fund expects them to implement ERAFP’s SRI approach.
“We might invest in mutual funds, but only for a very limited part of our investments – 3% max of our assets. In those few cases we could take the label into account, as one selection criteria among others.
“However, most of the labelled funds will remain out of our scope of investment,” Bonnet explains.
Cedrus’ Schaff answers: “Such a label is obviously a plus since it demonstrates the asset manager acts transparently and respects a number of requirements. But we would not only rely on these labels for our fund selection.
“It might be possible that some asset managers are fully in line with the principles promoted by these labels but have chosen not to be candidates for the label for marketing or costs reasons – as could be the case for foreign asset managers.
“We also consider that issues brought by energy transition remain global and companies operating solutions to address them can be located outside the EU.
“Therefore we mainly invest in global funds focusing on this theme. The ratio performance/risk remains primordial for us and we do not select funds only because of their SRI components.”
Regarding the impact of the label on inflows to its awarded strategy, Sycomore AM expresses confidence about the label’s beneficial effect and says it has already observed positive signs.
Also the firm adds that the fund having outperformed its benchmark, the MSCI Europe NR, by 6% since inception “might be amplifying these marks of interest.”
This article was first published in the July/August issue of InvestmentEurope.