The Belgian ESG label “Towards Sustainability”, a flow and performance analysis on labeled funds

The Belgian Federation for the Financial Market (Febelfin) issued back in November 2019 a quality standard on ESG matters, Towards Sustainability. On top of providing a decision-making facilitator for retail investors, the label aims at further develop the number and quality of sustainable investments portfolio. To get certified, the quality standard asks of investment funds to meet a set of minimum qualitative as well as quantitative thresholds, updated every two years. With this thesis, we aim at understanding the ESG-label in terms of intrinsic characteristics for which we collected interviews with experts involved in the ESG-label environment, Frederic Degembe, ING Investment expert; Julie Castiaux, KPMG Luxembourg Sustainable Finance Director and Tom Van den Berghe, representative at the Central Labelling Agency (CLA). Additionally, we performed a net flow and performance analysis on a sample of 120 funds. We found evidence of a significant increase in inflows post-label period and Covid-19 crisis, all size, age, risk-adjusted performance and volatility returns considered. Along with a performance resilience in time of major stress in comparison with a set of passive benchmarks aimed at replicating market conditions at the time.