Socially Responsible Investment Label
France has launched a new version of the socially responsible investment label (Investissement Socialement Responsible in French, ISR), which aims to standardize socially responsible investments, implement more stringent ESG screening standards, and promote the development of climate action.
This new version of the socially responsible investment label was approved by the French Ministry of Economy and Finance. The proposal was submitted by the Socially Responsible Investment Label Committee in July 2023 and will take effect in March 2024.
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Introduction to Socially Responsible Investment Label
Established in 2016, the Socially Responsible Investment label is France’s main tool for sustainable finance and allows the public to choose to incorporate ESG into savings products. French life insurance and retirement savings plans systematically apply the socially responsible investment label. Currently, ISR includes a total of 1,174 funds, with a total scale of 773 billion euros.
There have been no major revisions to the ISR label since its inception, and as ESG matters such as climate change become a priority for investors, updates to the ISR label have become necessary. In 2021, the French Ministry of Economy and Finance established the Socially Responsible Investment Labeling Committee, which brought together multiple stakeholders such as companies, financial institutions, and academia to redesign the content of the ISR label and strengthen environmental, social and governance requirements.
New Socially Responsible Investment Label
The new version of the socially responsible investment label mainly modifies the following three aspects:
- The new version of the socially responsible investment label defines the initial investment scope more strictly and adds negative screening in three aspects: environment, society, and governance. Policy provisions regarding shareholder participation and voting are more precise and binding.
- The new version of the socially responsible investment label draws on the content of the European Sustainable Finance Disclosure Regulation (SFDR) and considers the impact of investment on the environment and society in terms of dual importance, focusing on the Principal Adverse Impact (PAI). This requires ISR funds to conduct an analysis of the negative impacts of entities in the environmental, social and governance areas.
- The new ISR label integrates climate policy and extends negative screening to all new fossil fuel exploration, extraction, and refining projects. Portfolios with a high impact on climate change will also need to ensure transition trajectories and progressively align with the goals of the Paris Agreement. Climate impact will be used as a key principle for ISR labels.
The French Ministry of Economy and Finance believes that the new version of the socially responsible investment label will be simpler and more effective, help investors consider environmental transformation, and provide entities with opportunities for decarbonization financing.
Reference:
Bruno Le Maire annonce les contours du nouveau label Investissement socialement responsable
