A quality standard for sustainable finance products

News

A quality standard for sustainable finance products

2 October 2018

Regulatory News Alert

Over the past few years, different sustainable finance initiatives have been trying to change mainstream investments to integrate environmental, social and governance aspects (commonly called ESG). From exclusion of specific instruments to impact finance, some financial products are now proposed to investors that express the desire to match financial returns with responsibility.
In May 2018 and based on the recommendations from the EU Commission’s High Level Expert Group on Sustainable Finance ( HLEG), the EU commission launched its Action Plan for Sustainable Finance with the objective to transform the financial industry from the inside out to make it conscious of the role it plays in reaching environmental and social goals.

The Commission presented a package of measures as a follow-up to its action plan on financing sustainable growth. The changes proposed in the MIFID II Regulations with the introduction of the sustainability preferences in the suitability model and client profiling assessment is a first step in the implementation of the EU Sustainable Finance Agenda.

In that context—and integrating the position of the EU Commission—Febelfin (the Belgian Finance Federation) suggests a new quality standard for sustainable finance. The objective of the quality standard is to “qualitatively and quantitatively increase the level of sustainable financial products, and to mainstream its principles towards traditional financial products.”

Financial products compliant with the quality requirements of this standard will be listed on a dedicated website and receive a “Sustainable” label. The quality label targets all standardized products that are marketed as sustainable, towards private individuals and institutional clients in Belgium. Financial products distributed in Belgium are in the scope of this requirement whether they are set up under the Belgian law or from foreign jurisdictions.

To obtain the label, the financial product shall be compliant with the requirements of the below principles:

  • Implementation of sustainability strategies
  • Exclusion of a set of investments such as weapons or tobacco
  • Transparency of the underlying financial product shall provide information regarding its position towards potentially unsustainable practices and issues
  • For each issue or launch, it shall be disclosed if there is a specific ESG policy or not, and if so, more information on that policy shall be made available. All information on the sustainable characteristics of the product that is relevant to the potential client, shall be available in a clear, understandable and comparable way
  • Compliance with an advertised sustainability policy shall be supervised by an independent and qualified third party. The “Sustainable” label will be granted to the financial product based on this external verification.

The label proposed by Febelfin aims to enhance trust and provide a guarantee of the sustainability dimension of financial products without requiring investors to perform detailed analysis themselves.

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Contacts

Tom Pfeiffer
Partner - Sustainability & CSR
Leader
Tel: +352 45145 4246
topfeiffer@deloitte.lu

Lou Kiesch
Partner – Regulatory Consulting Leader
Tel: +352 45145 2456
lkiesch@deloitte.lu

Simon Ramos
Partner – IM Advisory & Consulting
Leader
Tel: +352 45145 2702
siramos@deloitte.lu

Julie Van Cleemput
Director – Strategy & Regulatory Consulting
Tel: +352 45145 2989
jvancleemput@deloitte.lu

Guillaume Brousse
Director – Audit & Assurance
Tel: +352 45145 2279
gbrousse@deloitte.lu

Julie Castiaux
Senior Manager – Sustainability
Coordinator
Tel: +352 45145 3648
jucastiaux@deloitte.lu

Benoit Sauvage
Senior Manager – RegWatch, Strategy & Consulting
Tel: +352 45145 4220
bsauvage@deloitte.lu

 

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