First government review of the landmark comply-or-explain regulation.
Half of France’s 48 biggest financial services companies are falling short of the reporting requirements of the country’s Article 173 climate and ESG reporting initiative, with three neither publishing any information nor explaining why not under the comply-or-explain mechanism.
France’s law on environmental/ESG reporting introduced in 2015 – informally known as Article 173 – requires investors to report information on how they integrate ESG into their investment processes, outline the greenhouse gas (GHG) emissions of their investments and contribute to the financing of a low carbon economy.
The initiative was a rare example of non-binding regulation in France, opting instead for a more Anglo-Saxon style comply-or-explain regime.
When Article 173 was introduced the French government set out a three-year timeframe for full review of adherence by the country’s financial companies, now published.
In the report, the government focuses particularly on the activities of the country’s largest 48 financial groups, which were expected to drive broader market behaviour.
It says 24 (50%) of them published information in line with the Article 173 requirements, while 21 (44%) produced reports that fell short of the suggested data required.
The remaining three (6%) – all of them investment managers – produced no report, nor any explanation why not, falling foul of the regulation. The report does not name the companies.
In general, the report said, insurance companies and public investment bodies, produced more relevant reports than investment management companies.
Separately, France is creating an Observatory of sustainable finance achievements and action in the country. The body will be jointly governed by its main financial industry professional bodies and Finance For Tomorrow, the sustainable finance group. A scientific committee for the new Observatory will be created.
Meanwhile, France has announced a mechanism for monitoring and assessing the climate-related commitments taken by Paris financial centre institutions.
This mechanism will be managed by the ACPR (French Prudential Supervision & Resolution Authority) and the AMF (Financial Markets Authority) regulators, as part of their respective duties to supervise banks, insurance companies and asset management companies and to review the information disclosed by issuers related to their extra-financial performance.
Each regulatory authority will set up a “Climate and Sustainable Finance” consultative commission as of the second half of 2019.
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