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Recommendation on
Sustainable Financial Products
Sustainable Financial Products 2
1. What?
2. Why? – Reasons & Objectives
3. Which? – Scope of the recommendation
4. How? – Development Process
5. Financing policies for sustainable products
a) Controversial activities
b) Exclusion
c) Sustainability strategies
d) Asset selection & screening
6. Accountability concerning sustainable products
7. Publication
8. Non-compliance
9. When? - Timing
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.
3 Sustainable Financial Products
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
Sustainable Financial Products | 15 October 2012
“True progress quietly and persistently
moves along without notice.”
St. Francis of Assisi
5
3. Which products?
Scope
• 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
Products marketed as ‘Sustainable’
Investments Savings Loans Insurances
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: http://www.febelfin.be/nl/duurzame-producten
Sustainable Financial Products 7
Basic Principles
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.
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.
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
FINANCING POLICIES
ACCOUNTABILITY
CLIENT’S CHOICE
Sustainable Financial Products | 15 October 2012
“Fundamental progress
has to do with the reinterpretation
of basic ideas.”
Alfred North Whitehead
9
5. Financing policies for sustainable products
• Always all 3 dimensions of sustainability: ESG
• Beyond legal requirements
• 3 layers
Sustainable Financial Products 10
Sustainable
Corporate Governance
Social
Environment
Sustainability strategies
Exclusion
Controversial activities policy
5. Financing policies for sustainable products
a. Controversial activities
Sustainable Financial Products | 15 October 2012
• 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
11
5. Financing policies for sustainable products
b. 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
5. Financing policies for sustainable products
c. 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
5. Financing policies for sustainable products
d. Asset selection & screening
• Investment products - Funds • At least 90% screened assets in the portfolio
• 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
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
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
Sustainable Financial Products | 15 October 2012
“Progress is the activity of today
and the assurance of tomorrow.”
Ralph Waldo Emerson
16
7. Publication
Sustainable Financial Products | 15 October 2012 17
• Febelfin website
• List of products
• Statistics
• as of 1/1/2013
• BEAMA website
• List of SRI funds + link
to funds database
• Statistics
8. Non-compliance
• Mediation by Febelfin/BEAMA
• Deletion from list and statistics
Sustainable Financial Products 18
9. When? - Timing
Sustainable Financial Products 19
1/2/2013
All sustainable products should be compliant
1/1/2013
All sustainable products launched after 1/11/2012 should be compliant
Publication of list of sustainable products on Febelfin website
1/11/2012
Start transition period Publication of Recommendation on
Febelfin website
Current market for sustainable financial products
Sustainable Financial Products 20
Funds
6,2 bill. EUR
Loans
3,5 bill.
EUR Insurances
? bill. EUR
Funds NAV: 2012 Q2
Loans provided: 2009-2011
Savings: 2011 Q4
Savings
3 bill.
EUR
www.febelfin.be
