The Luxembourg Fund Labelling Agency (LuxFLAG) has announced the launch of the LuxFLAG ESG Label. The ESG Label will be granted to investment funds which meet specific criteria related to their respect of Environment, Social and Governance objectives. The Label is available to UCITS and AIFMD funds domiciled throughout Europe or in equivalent jurisdictions. Three asset management companies have already committed to apply for the new ESG label: OFI Asset Management, Nordea and Sparinvest.
“Over the past ten years, the responsible investment sector has grown at a rate that has outstripped growth in most other investment strategies. The LuxFLAG ESG Label is a new tool in the broad range of initiatives that encourage fund stakeholders to act responsibly and aim for the achievement of a better and sustainable future. We in Luxembourg strongly support this goal” commented Pierre Gramegna, Minister of Finance of the Grand Duchy of Luxembourg.
“The new LuxFLAG Label is appropriate for investment funds which truly incorporate disciplined ESG criteria in their investment process. It will help these funds differentiate themselves from other offerings in the market place and it will help investors make informed decisions through the enhanced transparency and visibility the label provides”, said Mr Thomas Seale, Chairman of LuxFLAG.
Mr Seale continued: “As there is no existing product based label covering ESG, the new ESG Label by Luxflag fills a gap in the European investment fund market.”
Responsible Investing is an exciting area and is steadily gaining momentum with investors showing a growing interest in investment strategies that integrate Environmental, Social and corporate Governance criteria into the investment process. According to the KPMG RI Fund Survey 2013, the ESG category is by far the largest of all categories in the RI landscape, both in number of funds with 1,135 and in total AuM with EUR 198 billion (2012). In terms of creation of new funds, the sector demonstrated a steady increase. Approximately 100 funds were created in 2010-2011 and 62 new funds in 2012.
The financial crisis has forced the asset management industry to set up minimum standards and mechanisms to build up transparency and credibility within the financial sector. Asset managers now recognise that the integration of these standards in the investment process is a requirement from the investor community.
Until now LuxFLAG has offered two thematic labels: microfinance and environment. It has seen a two-fold increase in the number of funds it labels in the last two years as the number of responsible investing investment funds in Europe is growing.
The ESG Label is granted for a period of one year and can be renewed. The Label is granted by LuxFLAG’s Board of Directors, based upon an application by the investment fund including information reviewed by an auditor, and a recommendation by LuxFLAG’s Eligibility Committee of specialists.
The Eligibility Committee for the new Label is composed of: Nathalie Dogniez, Partner, PwC Luxembourg; Ulrika Hasselgren, President, Ethix SRI Advisors Sweden; Adrie Heinsbroek, Sustainability Advisor, ING, the Netherlands; Nicolas Hennebert, Partner, Deloitte Luxembourg; and Hakan Lucius, Head of Division, Corporate Responsibility and Civil Society, European Investment Bank.