Moving into fourth gear
LuxFLAG, the agency that grants labels to sustainable finance funds, has announced the election of a new chairman. Thomas Seale, CEO of European Fund Administration (EFA), is a well-known figure in Luxembourg. A former Chairman of the Luxembourg Investment Fund Association (ALFI), of which he is still a board member, Mr Seale is also a member of the OPC (investment fund) Committee of the financial supervisory authority, CSSF.
Kenneth Hay, the outgoing chairman who has led the agency since its creation six years ago, leaves the agency perfectly positioned to take advantage of growth in the sustainable sector. "Our early focus was on the creation of a solid reputation,” he explains. “This was based upon a conservative approach and robust processes. Stability and credibility were important objectives in the relatively young, diversified and rapidly changing field of Sustainable and Responsible Investment.” With the reputation of LuxFLAG now established, the agency is well placed to serve a market that is increasingly interested in those sectors.
Thomas Seale, who is reputed for his marketing skills, agrees that LuxFLAG is well positioned to support the current trend in Responsible Investing. “In this regard, I am pleased that both the Luxembourg Government and the Financial center are aligned around a strategy to foster the development of Responsible Investing here in the Grand Duchy.”
There is work to be done. As Responsible Investing gains credibility and market share, so the sector splinters and becomes more complex. A recent study conducted by KPMG Luxembourg, at the request of ALFI, identified a number of sub-sectors that are emerging as disciplines with distinct investment criteria. This bodes well for the work of any agency, like LuxFLAG, that can assist investors in choosing an investment.
The agency currently offers two labels: Microfinance Fund and Environment Fund. “Looking ahead, this will probably mean more labels” says Thomas Seale. “To give one example, there are microfinance institutions that focus on the SME sector; these companies no longer meet the criteria of “pure” microfinance while remaining outside the target range of traditional banks. Helping these companies to establish themselves is an important step in the direction of sustainability. The question is, do you stretch the criteria for a “microfinance fund” or do you create a new label? These are the sort of decisions we will be making going forward.” ER