Febelfin helps consumers make conscious choices for sustainable investments
7 February 2019 - 4 min Reading time
Consumers are more conscious than ever before, not only about what they eat and how they travel but also about their finances. They prefer not to invest in activities that harm people, the environment, or society. Therefore, Febelfin, in collaboration with banks, asset managers, and civil society, has developed a quality standard for sustainable financial products, such as investment funds.
If these products meet the standard, they can receive a sustainability label. With this standard, Febelfin aims to provide greater transparency for customers and encourage the financial sector to take more responsibility in addressing climate challenges.
What is sustainable?
Today, there is already a wide range of sustainable financial products, including investment funds, savings products, and insurance funds. The volume of sustainable investments tripled between 2013 and 2017, going from 7.7 billion euros to 24.1 billion euros (source: MIRA study, 2018). However, for investors, it is not always easy to decipher what sustainability exactly means.
For those who wish to invest sustainably, thorough research is necessary to ensure that their money goes only to companies or activities that align with their personal beliefs regarding people, the environment, and society. A sustainable investor, for example, would not want their money invested in the arms or tobacco industry, highly polluting activities, or companies that violate human or labor rights.
What do the sustainability standard and label represent?
With the quality standard and, especially, thanks to the sustainability label, consumers can be assured that they are not investing in highly harmful business activities, but rather in companies with a clear sustainability strategy and transparent policies on issues that are subject to societal debate, such as nuclear energy.
Investors receive clear and understandable information about the product's sustainability policy, which they can then compare with other products when making their conscious investment choices. Additionally, an independent institution will verify whether the product actually meets the standard and deserves the label.
How does the label contribute to the climate?
While the label encompasses more than just an environmental label, the climate impact of, for example, energy companies receives special attention. Companies that are committed to transitioning to less environmentally harmful alternatives or renewable energy can be included in a sustainable financial product. On the other hand, companies that are still too involved with the most harmful fossil fuels, such as coal, are excluded. In this way, the financial sector ensures that capital shifts to companies aiming to increase their positive impact.
Some energy companies may still be actively involved in controversial energy sources such as shale gas. According to the standard, limited investments in these companies can continue until 2020, but the product will then receive an adapted label. The requirements for climate impact are regularly tightened in any case.
Will the label evolve?
The Belgian sustainability label is already among the strictest in Europe. However, sustainability should not be limited to a small niche of products. To bring about real change in the financial sector, the quality standard must initiate significant efforts. This way, all market players, including providers of investment products and investors themselves, are involved.
Febelfin encourages banks and asset managers to raise the bar even higher, which is already the case for many products. Furthermore, the standard will be regularly reviewed and adjusted to meet societal needs and customer expectations.
The first labels are expected in the fall.
