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More than 3,500 labelled investment funds are currently active in Europe, representing more than €3 trillion in assets under management (out of 66,000 funds registered in Europe). A dozen labels share this market, with several of them having recently revised their standards to meet stricter requirements.
In this landscape, the FNG-Siegel label is a quality standard for socially responsible funds sold in German-speaking countries (Germany, Austria, Switzerland and Liechtenstein). It stands out for its evaluation system, which awards funds 0, 1, 2 or 3 stars according to a sophisticated rating methodology.
WeeFin welcomed its managing director, Roland Kölsch, to a webinar broadcast on 2 October. Interviewed by Pauline Berthouloux, who leads WeeFin's expertise team, he explained how the label works and what its objectives are.
Here are the main points he covered:
The FNG label is based on a graduated rating system (0-3 stars). Unlike other labels that operate on a binary basis (labelled or not), the FNG label offers a scale that makes it possible to:
The label also implements strict exclusion criteria for certain sectors such as coal, arms and nuclear power. It also has a minimum standard that includes:
In 2023, the label represented more than 220 funds with €80 billion in assets under management, mainly in German-speaking countries, but also in the United States and Canada.
Roland Kölsch presented the new variant of the FNG label dedicated to transition products, in line with the European Commission's recommendations. The aim of this variant is to facilitate the integration of securities from companies in transition to sustainability, which would normally be excluded by the strict criteria of the classic label. This will enable managers to support the transformation of companies in traditionally excluded sectors (e.g. utilities with a nuclear component).
This approach is intended to be pragmatic. It recognises that the transition to sustainability requires the inclusion of companies ‘on the way’ rather than limiting itself to those that are already exemplary.
The FNG label is currently limited to funds classified as Articles 8 and 9 under the SFDR. Roland Kölsch expressed reservations about the current SFDR classification, which he believes has become a meaningless ‘amalgam’ (with around 15,000 Article 8 funds today). He supports the idea of moving towards more precise SFDR categories, in particular with a ‘Transition’ category, and referred to the debate on the automatic integration of labelled funds into certain SFDR categories.
Integrating the social dimension into investment funds, particularly in secondary markets, remains difficult according to Roland Kölsch, who notes the absence of a European social taxonomy in the short term. For the Transition label, the social dimension is thus treated as a ‘hygiene filter’ (exclusion of unacceptable practices) rather than as a positive objective.
He considers impact to be a neglected aspect of current regulations, but one that is complex to define and measure.
Roland Kölsch believes that access to data is not the main problem today. The real challenges are quality and reliability. He believes that the potential reduction in CSRD reporting requirements could lead to a return to multiple forms being sent by asset managers to companies. He also points out that many market players, including companies, are in favour of structured regulation of ESG data.
The webinar concluded with a look ahead to the many developments to come in the field of sustainable finance, both in terms of regulation (SFDR, CSRD) and labels. Roland Kölsch emphasised the importance of a pragmatic approach that would enable the entire market to move towards greater sustainability, while maintaining quality and transparency requirements.
