06 May 2019

EFAMA comments on JRC technical report on EU Ecolabel

EFAMA welcomes the European Commission’s initiative to develop an EU Ecolabel for retail financial products. EFAMA sees this as an opportunity to create a coherent European approach and promote sustainable investments among retail investors. Given the wider context and current focus of the “Ecolabel”, EFAMA believes it makes most sense to confine the label to environmental sustainability.

Nevertheless, EFAMA agrees that some minimum safeguards pertaining to a product’s social and governance-related sustainability should be provided for. EFAMA would like to stress the need for the clarity of purpose and objectives this label is trying to achieve. Also, the EU Ecolabel criteria should strike the right balance between promoting the best practice and ensuring that the criteria are realistic so that asset managers can build a diversified portfolio.

Appropriately calibrated thresholds may be necessary to avoid green-washing and ensure that the label promotes the best practices on the market. However, it is important to avoid an approach that would be too stringent and prescriptive hence leading to box-ticking and insufficient supply of funds that meet the criteria. This would create the risk that the Ecolabel may not mobilize capital on the scale necessary to meet the Sustainable Finance and Sustainable Development targets.  

To ensure the success of the EU Ecolabel, it is of utmost importance that the JRC has a comprehensive understanding of the impact that the EU ecolabel proposal is likely to have on the market, including how many products and issuers would likely be eligible for the label.

To that end, EFAMA suggests appropriate testing / a feasibility study is performed to probe the market to analyse the impact of proposed thresholds and exclusions on a range of eligible financial products.

To have a full picture, all concerned stakeholders, including retail investors, issuers (both large and small and mid-caps) should also be properly consulted. While EFAMA is supportive of creating an EU Ecolabel to promote channelling of funds into sustainable investments and facilitate choice for retail investors, there are some concerns around increased costs EU Ecolabel will entail. It should be considered how to design the label so that it provides sufficient value-added for investors, whilst having to absorb the cost of requisite safeguards and verifications processes.   

Lastly, EFAMA would welcome a clarification on some aspects. EFAMA would like to inquire whether the Commission intends to develop additional labels on other aspects of sustainability, for instance an overarching “ESG” label, or perhaps a targeted “social label”. EFAMA is also wondering how the Commission sees the EU Ecolabel interacting with existing labels across the EU. 

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