The Role of Labels in Green Finance: Construction and Regulation of a Label Market in France

Patricia Crifo, Rodolphe Durand and Jean-Pascal Gond
Additional contact information
Rodolphe Durand: HEC Paris
Jean-Pascal Gond: Cass Business School

No 1399, HEC Research Papers Series from HEC Paris

Abstract: A dozen of green and sustainable labels have emerged on the financial markets of the Member States of the European Union since the creation of a first label in 1997 in France, allocated to nearly 1,360 financial products, demonstrating a quantitative success, especially in France. This article analyzes the development of such green and socially responsible labels in Europe over the past decades , their construction dynamics, and questions the real benefits of a proliferation of labels in this industry. Does the multiplicity of factors contributing to the development of labels achieve the desired end or does it encumber the market with loud but uncertain signals? While household savings are at their highest and there is a demand for financing the ecological transition, does the proliferation of labels not complicate the readability of the market ? We show that, instead of simplifying the choice of agents, the multiplication of labels tends to increase the noise provided by each of the quality signals and deteriorate confidence. Economic agents have less interest in benefiting from a generic label but are looking for less demanding labeling at a lower cost. The whole system can therefore play in a counterproductive way, each actor minimizing the intrinsic effort provided. As the number of labels grows, the information asymmetry grows and end investors may therefore turn away from labeled products. Only regulator can counter this trend.

Keywords: Responsible Investing; Labels; Green Finance (search for similar items in EconPapers)
JEL-codes: G28 M14 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2020-11-13
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3698156 Full text (text/html)

Related works:
Working Paper: The Role of Labels in Green Finance: Construction and Regulation of a Label Market in France (2020)
Working Paper: The Role of Labels in Green Finance: Construction and Regulation of a Label Market in France (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1399

DOI: 10.2139/ssrn.3698156

Access Statistics for this paper

More papers in HEC Research Papers Series from HEC Paris HEC Paris, 78351 Jouy-en-Josas cedex, France. Contact information at EDIRC.
Bibliographic data for series maintained by Antoine Haldemann ().