French SRI standards overhaul leads to full exclusion for fossil fuel developers

'Simple and effective' label urged to be adopted by all sustainable funds

Funds with exposure to the fossil fuel industry will no longer be eligible to use the state socially responsible investment (SRI) label in France, after a public consultation submitted proposals for a new standard.

Based on the recommendations of the consultation, which launched in October 2021, French minister Bruno Le Maire has unveiled a more ambitious version of the SRI label. According to Le Maire, the eligibility of the funds “will exclude companies that exploit coal or non-conventional hydrocarbons, as well as those that launch new projects for the exploration, exploitation or refining of oil or gas”. In addition, a transition plan aligned with the Paris Agreement will be required.

Alongside this climate principal, the updated SRI label will also reinforce selectivity on other ESG criteria. For example, management companies will have to ensure that they limit the negative impacts of their investments on ESG matters.

The new standard will be published before the end of November, and will come into force from 1 March.

Speaking about the launch, Le Maire said: “We must offer a simple and effective label to allow the French to give meaning to their savings. This is what we are doing with this new SRI label, in which the fight against global warming is becoming essential. We will thus allow savers to take into account the ecological transition, and businesses to finance their decarbonisation more easily.”

Important step against greenwashing

Research and campaigning NGO Reclaim Finance welcomed the announcement, claiming it as an important step forward in the fight against greenwashing as with the government finally recognises the “irresponsible nature” of companies involved in the fossil fuel industry despite the climate emergency.

“By excluding companies developing new fossil fuel projects from SRI-labelled funds, Bruno Le Maire has acknowledged that in the context of a climate emergency, the activities of these companies are irresponsible,” commented Antoine Laurent, advocacy lead at Reclaim Finance.

“While the precise criteria are still to be specified in new guidelines, it is clear that companies such as TotalEnergies, BP and ENI will be excluded. This is a major step forward for this label in its quest for credibility, and a clear and welcome signal ahead of COP28 of the urgent need to shift funding away from fossil fuels and towards sustainable energy.”

Reclaim Finance said it intends to pay close attention to the new standards, and call for all so-called ‘responsible’, ‘solidarity’ or ‘sustainable’ funds to adopt the same minimum exclusion criteria to guarantee their credibility and avoid greenwashing.

Additionally, given the difficulty of accessing reliable and transparent information, the group is recommending the use of refence databases from Urgewald, the Global Coal Exit List and Global Oil & Gas Exit List, which publicly document the activities of the fossil fuel sector and are the official references for the Belgian Towards Sustainability label.

The reaction was also positive from within the investment industry. Philippe Zaouati, CEO at Mirova, congratulated the label committee for having managed to move in this direction despite pressure from the fossil fuel industry.

“The SRI label is going to become a label with a strong exclusion of the fossil fuel sector, which should lead to significant reduction in the number of labelled funds or a major change in the management of these funds,” said Zaouati.

“This in no way detracts from the other criticisms I have levelled at the label in the past, but let’s be honest, they have now taken a back seat.”