SRI, Greenfin: An Overview of Certified Funds in France
Since 2019, Novethic has been publishing an overview of European labels, providing an analysis of trends in the market for sustainable funds that have their investment processes certified by a label.
As of July 31, 2023, the number of certified funds had surpassed 2,000, with more than 1,307 billion euros in assets under management. But while momentum is strong, the ongoing overhauls of most certification labels—including French public labels, Greenfin, and SRI—are making it harder to understand the guarantees they offer to investors. The vast majority of certified funds are “Article 8” under the SFDR and show only limited alignment with the taxonomy.
Nearly 80% of European-certified funds are classified as Article 8 SFDR funds, and the figure is roughly the same for SRI-certified funds. This is a first paradox, since certification attests to an additional requirement imposed by the fund manager. The analysis conducted by Novethic shows that there is ultimately a relatively weak correlation between certification initiatives and the decision to offer Article 9 funds—which thus differentiate themselves from major benchmark indices. Unsurprisingly, the Greenfin label, with its stringent environmental requirements, is the one most frequently awarded to Article 9 funds (77%).
The SFDR (Sustainable Finance Disclosure Regulation) is set to be revised, and the European consultation has just been launched, but it is worth noting that the self-classification system corroborates another analysis by Novethic. The alignment rates of funds labeled as compliant with the taxonomy remain very low. To date, the majority of labeled funds have not made any commitment to a minimum level of portfolio alignment. As for those that do announce a commitment, the average taxonomy alignment rate does not exceed 10%. Specifically, in France, the average taxonomy alignment of SRI-labeled funds is estimated at 5.60% (based on 74 funds analyzed), and 21.5% for the Greenfin label, based on 14 funds. These figures raise questions about the environmental—and even social—guarantees of these investments. While survey after survey confirms that investors are demanding the ability to invest in credible products that finance more sustainable business models, the supply side remains out of step and reluctant to use the taxonomy as a tool to combat greenwashing.
