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The reform of the French SRI label (Label ISR v3) will take effect on January 1, 2025. This reform introduces complex and technical developments. As a pioneer in SRI, LBP AM aims to shed light on the impacts of this reform, as well as the opportunities and benefits it presents.
First, the acceleration of the exit from fossil fuels.
Second, the new version of the label puts the emphasis on the environmental transition. It will require a systematic analysis of companies’ transition plans and, starting in 2026, will ask responsible investors to reallocate a minimum portion of their investments to issuers carrying out their transition.
Third, a gradual strengthening of the selectivity of funds. Funds will be stricter in the selection of companies they invest in.
And fourth, an enhancement of shareholder engagement and voting practices.
Firstly, the exclusion of fossil fuels. Here, the impact depends on the reference index. For example, if you have a highly concentrated index like the CAC 40, where TotalEnergies represents more than 7% of the index weight, the exclusion of fossil fuels will have a significant impact. Conversely, for broader indices like the S&P 500 or Euro Stoxx, where the weight of fossil fuels is more diluted, the impact will be more limited.
Secondly, the gradual strengthening of fund selectivity. This can pose challenges, particularly in the United States, where large issuers—the so-called Magnificent Seven—tend to have poor ESG ratings. The solution is “improved ratings” management, which allows investment in these poorly rated issuers under the condition that they engage in adopting better practices.
Lastly, more generally, these new requirements on transition and engagement demand significant efforts to upgrade tools and practices. These efforts, on which we have been working since the publication of the new framework, are perfectly aligned with LBP AM’s philosophy and intentions.
Firstly, the label encourages us to accelerate the environmental transition, which is particularly relevant given Europe’s and France’s strong ambitions in this area. Additionally, this aligns directly with LBP AM’s strong commitment to supporting the transition.
Secondly, the strong emphasis on engagement allows LBP AM to enhance its impact on the companies in which it invests.
Certainly, the label may have been criticized, but we remain convinced that this revision is moving in the right direction, towards higher standards and greater accountability.
Firstly, with regards to civil society, which is particularly sensitive to the issue of fossil fuel exclusion. This new exclusion will allow the label to serve as a benchmark, enabling investors to identify virtuous investments.
Secondly, this reform aligns with political ambitions. The transition approach is consistent with European and French objectives.
Finally, the reform meets the expectations of responsible investors. It pushes us to continue and deepen our efforts. It also highlights the decisive role policymakers assign to responsible investors in supporting the environmental transition - a cause that is particularly dear to LBP AM.