French SRI label: de-labeling wave confirms need for strict regulation #FrenchFinance

The new French SRI label came into force in January 2025. As a result, asset managers had to choose whether to keep the label or withdraw it, by refusing to apply the new criteria. A third of funds (1) dropped the label, demonstrating the limits of labels based on asset managers’ goodwill. This de-labeling wave stresses the need for strict safeguards to ensure the absence of fossil fuel expansion from all funds with social or environmental claims. Reclaim Finance is calling for such exclusions to be included in the overhaul of the European framework (SFDR) scheduled for this year, as an essential condition for the end of greenwashing.

In December 2023, the French Ministry of Economics and Finance published new guidelines for the SRI label (2). By excluding companies developing new coal, oil or gas projects (2), the government made the imperative expressed by the IPCC, the UN and the International Energy Agency (IEA) – to put an end to fossil fuel expansion in order to limit global warming to 1.5°C (3) – the basis of responsibility in a context of climate emergency.

Since then, fossil fuel exclusions and other adjustments made by funds to be compliant with the new label have helped tidy things up and reduce greenwashing, with the SRI label being one of the main benchmarks today for investors in search of more sustainable funds. But the loss of the label for a third of former SRI funds illustrates the lack of rigor that has reigned for years in the sustainable funds market, to the detriment of investors, as well as the limits of a voluntary, non-binding label that can be easily ditched.

For years, thousands of savers have invested in these funds in the belief that they were supporting sustainable finance and funds with demanding criteria, whereas in reality, many labelled funds continued to finance climate-damaging companies. These investors were misled, because of an overly permissive framework. What’s more, for those of them who now find themselves invested in funds that have “lost” their label, there is a risk that the deception will continue. If these investors have not been informed of the loss of the label, and have not had the opportunity to switch to a labelled fund, they are still unknowingly supporting fossil fuel expansion.

Asset managers who abandon the label as it becomes more restrictive are sending out a clear signal: finance will not transform itself; it must be strictly supervised to become more responsible and sustainable. A label, even if reinforced, will not be enough on its own to guarantee that the financial sector aligns itself with global climate goals. In the sustainable funds ecosystem, a simple comparison between the number of SRI-labeled funds (967) and the number of funds promoting a variety of ESG characteristics sold in France (over 4,000 (4)) shows just how much work remains to be done to ensure that companies developing new fossil fuel projects are excluded from all such funds. To ensure that asset managers take responsibility, regulators will have to go further and impose binding rules.

The example of the SRI label should serve as a lesson: as long as no strict minimum requirements are imposed on asset managers, so-called “responsible” funds will continue to be linked to fossil fuel expansion. The update of the SFDR regulation, announced for Q3 2025, represents a crucial opportunity to rectify this situation at European level. Any sustainable denomination for an investment product must guarantee the exclusion of companies involved in fossil fuel expansion (7). The French Financial Markets Authority (AMF) had already called for similar measures in a proposal published in 2023 (8). Regulators must not only lay down these rules, but also ensure that they are strictly applied, in order to guarantee that investors don’t receive misleading information.

The clean-up allowed by the implementation of the new SRI label rules illustrates above all the fact that savers were the first to suffer from this lax system. Even though SRI-labelled funds are now finally more strictly defined and exclude most of the fossil fuel sector (9), the lack of action by European and national regulators is delaying the transition of the financial system. Therefore, while the revision of the SRI label was necessary, it once again highlights the need for strict and binding rules, via the upcoming SFDR update, to enable the transition of the financial sector.