The climate commitments of French financial institutions

This joint report by the authorities reflects the initial work carried out in the context of the aforementioned monitoring and evaluation. This work was conducted on the basis of available public information and questionnaires sent to major market participants (9 banks, 17 insurers and 20 management companies), complemented by numerous bilateral exchanges and analyses based on data from both authorities.

This first exercise yielded several observations.

First, we note a relatively widespread awareness of the responsibility of the financial sector in the fight against climate change and related risks, as well as the key role of finance in supporting firms in their transition to a less carbon-intensive activity. The commitments made in the Declaration of 2 July 2019 were also accompanied by a strengthening of the information provided with regard to climate risk, once again on a voluntary basis, by the French financial sector. Such provision also relied, for some stakeholders, on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). In addition, all banks, insurance undertakings and most of the management companies analysed in this report published a withdrawal policy from thermal coal, due to the significant contribution of this sector to global warming. The market participants’ “coal” policies are discussed in a dedicated chapter of this report which was already published by the two Authorities on 29 October 2020. In this first publication, the Authorities established the exposure of French financial centre to be significantly lower than 1% of the total assets concerned for each sector.

These policies are a necessary first step in the mobilisation of financial players towards a low-carbon economy, and those of French players quite often stand out from their counterparts. However, as such, they remain insufficient in the face of the climate issue.

The policies implemented and the information provided still need improvement. Certain aspects of institutions' commitments need to be further specified and clarified, in particular with regard to the means implemented to monitor and achieve the defined objectives. Moreover, most players need to continue their efforts to better integrate climate factors into their overall strategy, a finding that also emerged from the analysis of the TCFD reports of French stakeholders included in the sample. These clarifications will not only enable financial institutions to better assess the “climate risk” and the means implemented to address them, but also to increase the transparency of information disclosed to the public and to investors.

However, the targeted objectives remain dependent on methods and approaches that are still fragile and lack harmonisation, making analyses and comparisons difficult. Both data collection and data processing are often based on different understandings and indicators which can vary significantly. This is why the methodologies on which institutional policies are based must now converge towards greater homogeneity and, therefore, comparability. Professional federations, but also supervisors and, more broadly, public authorities will be in a position to support institutions in order to achieve convergence in the methods used to measure exposures. This collective work will also help to better assess the ambition of the commitments made.