Climate risk analysis and supervision Joint ACPR/AMF Report October 2022
For the past three years, the ACPR and the AMF have published a joint annual report focusing on the commitments of French financial institutions to combating climate change and achieving carbon neutrality by 2050. This third report provides an opportunity to take stock at the end of this three-year period.
The objective of the monitoring exercise, which was set up in 2019 at the same time as the ACPR’s and AMF’s Climate and Sustainable Finance Advisory Commissions (CCFD in French), is to measure the evolution of financial institutions’ commitments to combating climate change, as well as the credibility of their fossil fuel policies and their implementation.
The first report published in 2020 made several key points, first among which was the recognition that financial sector participants have a responsibility in fighting climate change, even though they cannot substitute for public policies. We nonetheless identified some important avenues for progress regarding coal financing exit strategies and made a set of recommendations encouraging financial institutions to make voluntary commitments that are rigorous, clear and comparable.
The second report published in 2021 covered a broader scope, including sector-wide policies on hydrocarbons in general. While highlighting a few improvements that had been made, it also stressed that several recommendations made in the previous report still needed to be addressed. This observation was echoed by the Minister for the Economy, Finance and the Recovery, who urged the financial sector to move further and faster on the issue.
This year, the third edition of the report includes a focus on the governance frameworks set up by sector participants to monitor their climate commitments.
Following the analyses conducted by the two Authorities, and the work of their respective Climate and Sustainable Advisory Commissions who helped in preparing this report, several areas of improvement were identified.
Furthermore, the ACPR and AMF found that a significant number of financial institutions have committed to net zero initiatives, grouped together under the “Glasgow Alliance”, the evolution and impacts of which will need to be monitored. However, over the past few years, financial players have reduced their coal financing at varying rates, and there has been no notable change in sector policies on other fossil fuels. Moreover, approaches continue to differ widely, commitments have not been sufficiently implemented on an operational level, and many of the previous reports’ recommendations can thus be reiterated.
European and global standards on non-financial reporting, particularly relating to climate, are set to evolve significantly thanks to the efforts of the European Financial Reporting Advisory Group (EFRAG) and the International Sustainability Standards Board (ISSB). Over the next two years, the regulatory texts should strengthen requirements for financial players to report non-financial information on their environmental and climate policies. We are therefore taking the opportunity, with this third report, to encourage French financial institutions to increase their efforts and transparency regarding the implementation of their voluntary commitments and the requirements arising from current and future regulations.
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- Published on 12/19/2022
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Updated on: 12/19/2022 16:32