France’s AMF securities regulator issues reminder on company extra-financial comply-or-explain info

Reporting increasing but presentation of data needs improving says regulator.

France’s AMF securities regulator has issued a list of reminders for companies to report ESG information under the country’s Grenelle II law, including whether so-called extra financial issues are weighted and included within executive bonus payments. The Grenelle II law was introduced by France in July 2010 and obliges French companies to consider how their social and environmental activities be externally reported. The law was the successor of 2007’s “Grenelle de l’environnement” gathering of French government and stakeholders to map out the country’s future ecology and sustainable development plans. In the latest communication, the AMF reviews the progress of French companies on Grenelle II reporting and re-iterates 12 areas where it says it wants to see more evidence of action. The AMF said the update was important given indication from the European Commission in a Directive from April this year that it was moving towards mandatory extra financial reporting. The French regulator noted that increasing numbers of institutional investors are also integrating ESG factors into their selection of companies. The progress report looks at 60 French companies listed on the Euronext Paris exchange, as well as a number of smaller companies. The AMF said that while most companies were making progress on extra-financial reporting, some had cited difficulties in aligning their calendars for extra-financial and financial reporting.It said the amount of extra financial information published by companies also varied enormously, ranging from only two pages for one firm and 87 pages for the firm with the biggest extra-financial report (the average was 24 pages). It said none of the French companies sampled had yet to produce an integrated extra-financial/financial report. Drilling down to the specific extra-financial indicators required by Grenelle II (training, absenteeism, sexual equality, workplace accidents, waste, water consumption and C02 emissions), the AMF again said that while reporting was improving, the data and calculations provided were so heterogeneous and varied that it made company comparisons difficult. The report found that 62 % of the companies sampled had sought third-party verification of some or most of their extra-financial indicators. In terms of recommendations, the AMF said one major improvement required was the ‘explain’ part of Grenelle II’s comply-or-explain regime in the event that companies cannot provide certain pertinent extra-financial data. The majority of the other AMF recommendations deal with the transparency, availability and assurance of ESG information. Point number 12 reminds to companies that article L. 225-37 of France’s amended commercial code requires corporate boards to define and quantitative and qualitative criteria for including extra-financial criteria in executive bonuses.
Link to AMF document