MICROCAPITAL BRIEF: Luxembourg Fund Labeling Agency (LuxFLAG) Launches Environment, Social, Governance (ESG) Label to Certify Investment Vehicles

The Luxembourg Fund Labeling Agency (LuxFLAG), a nonprofit organization that certifies the operations of investment vehicles that support microfinance and environmental initiatives, recently began offering a third category of fund label for investment funds integrating Environment, Social and Governance (ESG) principles in their investment strategies. LuxFLAG labels expire after one year if not renewed.

To be eligible for an ESG label, an investment fund must: (1) comply with the European Union directives entitled Undertakings for Collective Investment in Transferable Securities and Alternative Investment Fund Managers; (2) describe and demonstrate their ESG strategy; (3) screen their investment portfolio to meet LuxFLAG’s ESG criteria; (4) comply with LuxFLAG’s exclusion list; (5) publish its entire investment portfolio at least once a year; and (6) work with an auditor to demonstrate compliance with LuxFLAG’s principles.

As of April 2014, 27 microfinance investment vehicles hold the LuxFLAG Microfinance Label, representing assets of approximately USD 4.03 billion, and 10 funds hold its Environment Label, representing assets of approximately USD 713 million.

By Meraj Husain, Research Associate

About Luxembourg Fund Labeling Agency (LuxFLAG)
Established in 2006, the Luxembourg Fund Labeling Agency (LuxFLAG) is a nonprofit organization that evaluates and certifies the operations of investment vehicles with three possible labels (1) Microfinance, (2) Environmental, or (3) Environment, Social and Governance (ESG). LuxFLAG’s labels help distinguish investment funds that support initiatives in the microfinance, environment or ESG sectors and provide transparency for investors. As of April 2014, 27 microfinance investment vehicles hold the LuxFLAG Microfinance Label, representing assets of approximately USD 4.03 billion, and 10 funds hold its Environment Label representing assets of approximately USD 713 million.

Sources and Additional Resources:

[1] Luxembourg Fund Labeling Agency: LuxFLAG Launches the First European ESG Label

MicroCapital, April 28, 2014, Luxembourg Fund Labeling Agency (LuxFLAG) Provides Environmental Label to Parvest Green Tigers Fund; Microfinance Label to EU Microfinance Platform, Symbiotics (SICAV) SEB Microfinance Fund

MicroCapital, April 20, 2013, Luxembourg Fund Labeling Agency (LuxFLAG) Accepting Microfinance Label Applications Through May 7, Issues Environment Label to BNP Paribas L1 Equity World Aqua

MicroCapital, February 26, 2013, Association of the Luxembourg Fund Industry (ALFI), LuxFLAG Host “Responsible Investing Conference,” May 15, 2013, Luxembourg

MicroCapital, February 14, 2012, Luxembourg Fund Labeling Agency (LuxFLAG) Awards First Microfinance Label to Azure Global Microfinance Fund, responsAbility Financial Inclusion Fund

MicroCapital Universe Profile: Luxembourg Fund Labeling Agency (LuxFLAG)

Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at https://www.microcapital.org/products-page/

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