Product labels and categorisation

3 minute read

Product labels

Global measures, including those under the EU under the Sustainable Action plan (especially the EU Taxonomy and SFDR reporting requirements) and the UKs forthcoming Sustainable Disclosure Regulation (SDR) are doing a lot to standardise the categorisation and language used to describe sustainability products.

The continued development of this space has also led to the development of a number of specialised labels that investors can use as points of reference. These labels aim to guarantee a quality level regarding sustainable asset management.

Read: Novethic – Overview of European Sustainable Finance Labels Pages 2 –3

Key points:

  • The last decade has seen nine dedicated sustainable finance labels launched
  • Labels serve as a benchmark or responsible investment practitioners but are still little known to a wider audience
  • As with the responsible investing/ sustainable finance world in general – the labels cover a broad range of concepts and criteria including different approaches to ESG investing and thematic funds
  • France is the only country that has created and supports two public labels: the SRI label, dedicated to responsible investment; and the Greenfin label for more committed environmental funds.
  • There are two categories of labels – those that focus on ESG and those that that focus on green finance – although the boundaries between the two categories can be vague 
  • The variety of terminologies (SRI, ESG, Greenfinance, Climate) further complicates the readability of the approach.

Under the Sustainable Finance Action Plan, the EU is also developing the EU Ecolabel for Retail Financial products to sit alongside/ within the existing EU Ecolabel that ‘is awarded to products and services meeting high environmental standards throughout their life-cycle’.1

The aim is to provide guidance on the financial products retail investors can invest in, if they wish to support environmentally sustainable projects and activities.

The European Commission work plan 2020-2024 identifies as one of its primary objectives to ‘Mainstream and further develop the EU Ecolabel as a relevant tool in policies and initiatives promoting SCP, CE, sustainable lifestyles, sustainable finance and climate action’.