Interview by Agefi Luxembourg with Patricia Kaveh, Head of Distribution. - 18 May 2021

The rise in the significance of ESG is a deep-seated trend that meets with the expectations of both individuals and institutional investors. Within this context, what impact will the adoption of the SFDR have on the sector?

The objective of the European Regulation known as the “SFDR” (Sustainable Finance Disclosure Regulation) is to ensure greater transparency as well as a framework for comparing the range of investment funds on offer in terms of their respective approaches to environmental, social and governance issues (ESG). The core idea is that investors should be able to identify products more easily and have access to non-financial documentation subject to minimum standards at European level. A broad range of investment products of this type has come onto the market in recent years under the impetus in particular of institutional investors which, with varying degrees of commitment, are seeking to ensure a responsible dimension to their investments. The provisions of this Regulation will come into force on a staggered basis over time, with the process starting on 10 March 2021.

What measures have operators in the fund industry already taken?

Management companies have considerably expanded the range of socially responsible investment (SRI) funds over the last few years and also enriched the notions embraced by this product segment with concepts such as ethical funds, ESG, responsible investing, sustainability, SRI, impact funds, etc. In order to cater to this trend, labelling schemes have been organised to offer greater transparency – and have successfully done so. However, it is also true that the emergence of various labels in different countries has increased complexity not only for investors but also for management companies: the question of which label to choose arises for each new product marketed.
The SFDR provides a new basis for understanding the sector – in parallel with labels – setting out fixed minimum standards in order to enable the ESG of investment funds to be compared with one another.
As far as distributors are concerned, the timing of the SFDR also coincides very well with another European regulation set to come into force shortly, on the incorporation of ESG preferences into MiFID II client questionnaires, which are aimed at ensuring that the investments proposed are adequate for clients’ needs: this issue is also being discussed at the moment with a view to the publication of guidelines during the first quarter of 2022, which will then be applied during the second half of 2022.


For the management companies that Crédit Mutuel Investment Managers represents, the adoption of the SFDR offers an opportunity to reassert their commitments and their close involvement with responsible finance. For example, Crédit Mutuel Asset Management has been dedicating efforts to socially responsible management for more than 15 years through the creation of fund ranges, labelling and the incorporation of ESG criteria into its funds. Its ambition today is for most of its open-end funds to fulfil the criteria laid down by Article 8 or Article 9 of the European SFDR.
Following the initial commitment made by Crédit Mutuel Asset Management in 2012, BLI Banque de Luxembourg Investment signed up to the United Nations Principles for Responsible Investment (UN PRI) in 2017, which has enabled it to reinforce the position of ESG within the investment solutions offered by it and to lay the foundations for clear and transparent communication regarding responsible investment. The classification introduced by the SFDR should be viewed against the backdrop of this dynamic and formalises existing practices. A number of funds from the BLI range are already compliant with Articles 8 or 9 of the SFDR. The objective is, over time, to ensure that most of the product range is compliant with these classifications.

Will banks continue to require green or responsible finance labels?

Until now, labels have performed the role of providing some degree of clarity for investors wishing to distinguish between sustainable funds.
There are numerous labels in Europe: the ISR and Greenfin labels in France, the FNG Siegel in Germany and Switzerland, Luxflag in Luxembourg, Towards Sustainability in Belgium, and the Nordic Swan Label in the Nordic countries.
The entry into force of the SFDR has reshuffled the deck since, by 1 January 2022, a large number of funds will have to be classified according to Article 8 (promotion of ESG as opposed to its incorporation until now).
It is still uncertain what the impact of MiFID II will be with the incorporation of sustainability into client preferences. However, the position is set to change if the texts currently being discussed are adopted. The entry into force of the taxonomy at the end of the year will also shape a new landscape for ESG/SRI and impact funds.
Until now, some labels have acted as guarantors for minimum transparency standards. It is very likely that, following the regulatory developments being introduced under the SFDR and MiFID II, in future labels will either become more specialised or will impose more exacting standards.