The EU’s nascent sustainable funds label has been amended after being described as ‘too ambitious and not achievable’
The Ecolabel is an existing EU certification awarded to a range of products which meet high environmental standards aimed at end consumers. The scheme is being extended to include financial products for the first time to “enable retail investors to identify products that finance the climate and ecological transition”.
The revised criteria require a minimum of 60% of portfolio assets invested in eligible green investments for equity funds – a reduction from the previous threshold of 70% – to be eligible for the label.
But perhaps the most consequential change is the introduction of a “three pocket” approach which would allow fund managers to meet the 60% threshold by investing “in transition activities” and “to leave room for diversification”.
Edoardo Carlucci, a policy expert at EU campaign group Better Finance and member of a group of experts advising the EC on the label criteria, said that the original proposals were preferable, adding that the second draft “ provides too much flexibility for managers to comply with the green threshold and will result in a huge variety of labelled funds”.
He claimed that the new criteria would confuse the market “as it is not immediately clear how green an Ecolabel fund is, whether it has the maximum 60% of assets invested in eligible green securities or the bare minimum of 20%.”
“We don’t think the most important thing for Ecolabel products is to maximise market share. Rather, it is to create a new generation of finance products with high environmental standards.”
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