PARIS, June 22 (Reuters) – France is working to confirm its position as the world leader in publishing business climate information with a new set of binding targets that require investors to declare the degree of greening of their assets and set greenhouse emissions targets every five years.
In 2015, when it hosted the UN climate talks that struck a major deal to move the world away from fossil fuels, France took the lead in demanding financial institutions and asset managers that they disclose their exposure to climate risks.
Since then, the debate has become more widespread and countries and companies around the world are vying for the position of champions of the environment.
This month Britain hosted the G7 talks that supported mandatory climate disclosure and some policymakers want an agreement to establish global reporting requirements in time for the UN talks on the climate. November climate change in Glasgow. Read more
France has sought to consolidate its lead with the first global regulation, published on June 2 and taking effect from the 2021 reporting period, to require investors to set greenhouse gas emissions targets every five years until 2050 and for quantified biodiversity protection objectives. .
The 230 regulated portfolio management companies will be required to report the percentage of their assets that are green and their exposure to fossil fuel companies.
France wanted European governments to set the ground rules, rather than importing voluntary recommendations influenced by the United States. He says his 2015 rules served as a model for the EU sustainable finance disclosure regulations that are currently in place. Read more
“We don’t want to depend on an executive who comes from the United States,” former secretary of state for environmental transition Brune Poirson told Reuters.
BUILDING ON EXPERIENCE
In 2015, France was at the forefront when it introduced the obligation for institutional investors and asset managers to explain how they took climate risks into account or to justify their refusal.
With several years of experience and the entry into force of disclosure regulations in the European Union, France seeks to go further than its peers.
AXA Investment Managers, the asset management arm of the French insurer, said the updated French rules were “more detailed than European regulations” and should be used as a “user’s guide” to put in practice the new requirements of the EU.
This month’s update also made mandatory the recommendations of the Industry-Led Working Group on Climate-Related Financial Disclosures (TCFD), which a growing number of companies globally are following on. on a voluntary basis.
Paris has supported the principles underlying the US-influenced TCFD recommendations since their publication in 2017, but had previously refrained from incorporating them into the French framework.
The change puts it just ahead of Great Britain, which has proposed that UK companies comply with TCFD recommendations from next year. Read more
Central bankers are among those who say mandatory rather than voluntary reporting is needed to deal with the risk of assets that could prove to be of low value due to their exposure to the climate.
“Disclosure will help markets appropriately assess climate-related risks and ensure efficient allocation of capital,” Banque de France Governor François Villeroy de Galhau said at an online conference on central banks at the beginning of the month.
“This is why disclosure should become mandatory, at least initially for financial institutions, as is already the case in France, and for large companies,” he said. Read more
RULES AGAINST REALITY
While representatives of French asset managers supported France’s approach, they said the information rules for investors were ahead of those of the companies making up their portfolios.
“The lack of data published by issuers will prevent us from meeting regulatory requirements in the short term,” said Alix Faure, head of sustainable investment at the association of French asset managers.
Regardless of governments and regulators, many investors pushed for more climate transparency, which to some extent eroded France’s advantage as a pioneer.
The CDP campaign group, which tracks the disclosure of company information, had 19 French companies on its A list for transparency last year, tied with Germany but behind Britain with 21 companies.
“Everyone is catching up, especially in Germany where large German companies must be more transparent because investors demand it,” said Laurent Babikian, director of capital markets at CDP.
While climate rules once deterred investors who sought the highest returns, investing in sustainable and ethical businesses is now widely seen as a way to reduce financial risk.
A study by the central bank of France in January found that French investors have reduced their exposure to companies in the fossil fuel sector by 39% since 2015, suggesting that 28 billion euros ($ 33.34 billion) have been channeled elsewhere.
Green lobby groups, however, wonder if French leadership has had much of an impact so far.
“France has proclaimed itself a leader in green finance since 2017, but four years later, the inability of the government to induce a reorientation of financial flows reveals its failure in terms of climate policy,” said Lorette Philippot, activist of the Friends of the Earth France in a press release. .
(1 $ = 0,8393 euros)
Reporting by Leigh Thomas; additional reporting by Mark John in London; edited by Barbara Lewis
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