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Febelfin Recommendation on Sustainable Financial Products


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Febelfin Recommendation on Sustainable Financial Products

  1. 1. Recommendation onSustainable Financial Products
  2. 2. 1. What?2. Why? – Reasons & Objectives3. Which? – Scope of the recommendation4. How? – Development Process5. Financing policies for sustainable products a) Controversial activities b) Exclusion c) Sustainability strategies d) Asset selection & screening6. Accountability concerning sustainable products7. Publication8. Non-compliance9. When? - Timing Sustainable Financial Products 2
  3. 3. 1. What?• A recommendation directed at all Febelfin members that (have the intention to) commercialize products under the heading of ‘sustainable’, ‘socially responsible’, ‘ethical’, …• It stipulates the minimum criteria these products should meet with regard to: • Financing policy • Accountability• Providers (distributors of sustainable financial products) can go beyond these criteria and have stronger criteria for their own products in order to distinguish themselves. Sustainable Financial Products 3
  4. 4. 2. Why?Reasons & Objectives• Consumers demand transparency and clear information about the composition of sustainable products• Consumers demand assurance about the quality of sustainable products• Society demands a pro-active approach from the sector with regard to sustainable products and sustainable financing• The framework however should leave room for product innovation and responsiveness to market evolutions• This is no endpoint, but a first step• We are open to a regular evaluation of the recommendation and further dialogue with the stakeholders Sustainable Financial Products 4
  5. 5. “True progress quietly and persistently moves along without notice.” St. Francis of Assisi Sustainable Financial Products | 15 October 2012 5
  6. 6. 3. Which products?Scope Products marketed as ‘Sustainable’ Investments Savings Loans Insurances• The scope of the recommendation is all financial products commercialized under the heading of ‘sustainable’, ‘socially responsible’, ‘ethical’, … • Investment products: Funds • Savings products • Credit: Loans• Insurance products • Not in this recommendation • Similar requirements could be applied to unit-linked products Sustainable Financial Products 6
  7. 7. 4. How?Development process• Febelfin NGO Platform• Stakeholder consultation and working groups• External advice (Belsif & Forum Ethibel) + existing BEAMA methodology for SRI funds• Public consultation of draft recommendation• Website: Sustainable Financial Products 7
  8. 8. Basic Principles FINANCING POLICIES There are minimal policies that should be in place regarding the companies, governments and projects that are eligible for financing by way of sustainable products. ACCOUNTABILITY Providers should be transparent and communicative about which choices they made, why they think these are suitable for a sustainable product, and how they implement them. CLIENT’S CHOICE The client should be able to make an informed decision whether a specific implementation of sustainability suits his/her personal beliefs and values. Sustainable Financial Products 8
  9. 9. “Fundamental progress has to do with the reinterpretation of basic ideas.”Alfred North Whitehead Sustainable Financial Products | 15 October 2012 9
  10. 10. 5. Financing policies for sustainable products Environment Social • Always all 3 dimensions of sustainability: ESG Corporate • Beyond legal requirements Governance Sustainability • 3 layers strategies Sustainable Exclusion Controversial activities policy Sustainable Financial Products 10
  11. 11. 5. Financing policies for sustainable productsa. Controversial activities• Providers need a policy on how they deal with the financing of activities regarded as ‘controversial’ in the public opinion E.g. Explaining their position on nuclear energy and, when applicable, why they think investing in nuclear energy companies is eligible in a sustainable fund?• Controversial activities do not have to be excluded by default• This policy should be published Sustainable Financial Products | 15 October 2012 11
  12. 12. 5. Financing policies for sustainable productsb. Exclusion• Financing of the arms industry• Violation of the Principles of the UN Global Compact • Human rights • Freedom of association • Labour rights • Environmental precautions • Anti-Corruption Sustainable Financial Products 12
  13. 13. 5. Financing policies for sustainable productsc. Sustainability strategies • Normative screening • Compliance with international conventions and treaties • Best-in-class method • Highest scoring companies/countries within a sector • Thematic focus • Special attention to a specific aspect of sustainability • Engagement • Shareholder engagement in financed companies/countries Sustainable Financial Products 13
  14. 14. 5. Financing policies for sustainable productsd. Asset selection & screening• Investment products - Funds • At least 90% screened assets in the portfolio Equity, bonds (corp./Gov.), deposits, UCI, derivatives, credits, notes, ABS, … need to comply with the SRI policy of the provider and the chosen sustainability strategy • No more than 10% of the following instruments: • Instruments which can not be screened (real estate, commodities, …) • Instruments that are held for a limited period of time and which have no sustainable alternative • In a ‘buy and hold’ strategy’, instruments that were compliant at the period of acquisition but currently not anymore• Savings products • Analogous to funds, but based on the total of sustainable covering assets on the bank’s balance sheet• Loans • Loans used for sustainable investments and projects, as determined by the lender • Statutory ‘green’ loans Sustainable Financial Products 14
  15. 15. 6. Accountability concerning sustainable products• Transparency & disclosure • Publication of all relevant information on a website• Audit & control • Quality management of whole product chain • Independent & specialized audit & control• Reporting • Developments relevant to the sustainable character of the product Sustainable Financial Products 15
  16. 16. “Progress is the activity of today and the assurance of tomorrow.”Ralph Waldo Emerson Sustainable Financial Products | 15 October 2012 16
  17. 17. 7. Publication• Febelfin website • List of products • Statistics • as of 1/1/2013• BEAMA website • List of SRI funds + link to funds database • Statistics Sustainable Financial Products | 15 October 2012 17
  18. 18. 8. Non-compliance• Mediation by Febelfin/BEAMA• Deletion from list and statistics Sustainable Financial Products 18
  19. 19. 9. When? - Timing 1/11/2012 Publication of Recommendation on Start transition period Febelfin website 1/1/2013 All sustainable products launched Publication of list of sustainable after 1/11/2012 should be compliant products on Febelfin website 1/2/2013 All sustainable products should be compliant Sustainable Financial Products 19
  20. 20. Current market for sustainable financial products Funds Loans 3,5 bill. 6,2 bill. EUR EUR Insurances ? bill. EUR Savings Funds NAV: 2012 Q2 3 bill. Loans provided: 2009-2011 EUR Savings: 2011 Q4 Sustainable Financial Products 20
  21. 21. Any questions ?FEBELFIN: Tom Van den Berghe - Sustainable Financial Products 21
  22. 22.