The decrees related to the new official SRI label promoted by the government authorities in France were published at the end of December. but its implementation will be difficult given the questions arising relating to its setup.
This label was sought by certain large asset managers who wanted to label their entire range as SRI after an annoying episode with a team from France Télévisions. The team was astonished that certain SRI-labelled funds on the market held companies in their portfolios that clearly should not have been there.
Instead of proposing a stricter label. the government authorities partly followed the proposals of these major players. by approving less strict analysis methodologies than certain existing labels and which can give rise to varying interpretations. For years. most SRI asset managers have favoured a best-in-class approach. which. for this type of management. qualifies companies that are "the best in the category". That includes. for instance. most companies on the CAC 40. Under these conditions. it is difficult to recommend a label with stricter conditions. which would eliminate de facto certain large companies that regularly receive awards for their actions whilst. elsewhere. they have still have a lot to do to be recognised by labels with stricter conditions.
The Paris market therefore offers an approach so that the general public can more easily understand socially responsible investment. whilst accepting that the required conditions are achievable by the greatest number of these companies. which allows asset managers to continue to manage without modifying their practices for greater portfolio diversity...
This closely resembles recent European decisions to reduce the obligations for emitters of NOX or CO2. so that all European car manufacturers comply with the legislation.
And that does not take account of the current changes affecting all asset managers. who now must always take into account environmental and social constraints. Otherwise. their investors may not understand why certain companies are still in their portfolio. Asset managers (including in unlisted investments) can no longer invest without taking these ESG criteria into account.
So why promote an SRI label that brings nothing new to the table and that most asset managers will be able to obtain? The Paris market clearly remains several years behind and is adapting with difficulty to a market that has already evolved. as many French (smaller) and foreign asset managers have developed theme-based products with a desire to demonstrate the rationality of the strategy implemented in order to achieve these well-identified ESG objectives.
The Paris market could have moved well ahead by offering a strict. theme-based label that investors could better identify with. Unfortunately the Paris market has chosen a less restrictive path. though it means the label may be underused or disappear entirely due to a lack of participants. It's a shame that after more than three years. this is where things stand!
Olivier de Guerre