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Alignment of the French and EC Sustainable Finance Action Plans

Reference: LIFE18 IPC/FR/000010 | Acronym: Finance ClimAct

PROJECT DESCRIPTION

BACKGROUND

An orderly transition to a low carbon and climate resilient economy requires a rapid shift in the capital allocation in the EU. The integration of climate mitigation and adaptation considerations in the financial system is critical to achieve this objective, as reflected in the EC Sustainable Finance Action Plan adopted in March 2018, and the related regulatory package. France has been a pioneer in this field, notably by initiating a collaboration between the Environmental Ministry and the Treasury in 2012, by introducing the Energy Transition Law in 2015, and the Energy Transition Label for funds. The Energy Transition law, in its Article 173, requires investors to disclose the alignment of their portfolios with climate goals and to set climate targets, and specific companies to strengthen their climate information reporting about significant indirect emissions and climate risks management. However, sustainable finance is still an emerging topic, where agreed metrics, standards and labels are nearly absent, and with significant knowledge gaps (experts in finance have limited knowledge on environmental issues and experts in environment often have limited abilities in finance). In this context, the mobilisation of investors on climate remains difficult. This situation creates a risk for the dynamic of sustainable finance in Europe that can be addressed by the French authorities and key stakeholders, as leaders in this field. This need will become even more intense post-Brexit, with increased competition between London, Paris, Frankfurt and other EU financial centers to become the greenest and host the emerging activities related to sustainable finance.


OBJECTIVES

The main objectives of the A.F.F.A.P. project are threefold: 1) Full compliance: Upgrading the capacity of supervisors and regulated entities to fully implement existing and forthcoming mandatory requirements related to sustainable finance (e.g. climate related- risk analysis, disclosure, product information and integration into financial advice). Sustainable finance quickly needs to become a normal regulatory topic, an area where the rule of law applies, with no excuse related to the lack of capacity, uncertainty on metrics, etc. 2) Level-up the playing field: Increasing the standards regarding the relevance of climate risk metrics and assessment frameworks, the comparability of information disclosed, the evidence provided to back green marketing claims, in order to reach a level that makes those practices solid enough to actually inform investment decisions; and 3) Go mainstream: Combining regulatory reforms, innovative tools and mass communication to get green products out of their niche and into the mass market.

In addition to the IP budget itself the project will facilitate the coordinated use of 19 516 000 EUR of complementary funding from French Ministry of the Environment and ADEME, AFD, NKI, IKI Germany, Swiss government (FOEN), Finance for Tomorrow, Climate Works Foundation, Rockfeller Brother Fund, BPI France, Hewlett Foundattion and CDP funds.


RESULTS

Expected results: In 5 years time, the expected results are the following:

  • assets under management invested in green labelled products in France reach 10% of market share (compared to <1% today);
  • all French banks and insurers have conducted a climate-stress test;
  • 90% of banks, 90% of institutional investors and 70% of asset managed disclose comparable climate-related information compliant with mandatory requirements;
  • all French supervisory authorities have the capacity and system in place to enforce all French and EU sustainable finance related requirements;
  • the authorities are able to quantify and consolidate the contribution of French financial institutions and retail investors to French, European and International climate goals; and
  • 98% of suitability assessment conductedwith retail clients integrate questions on sustainability preferences, and 60% of such assessments align with best practices;
  • 50% of retail clients allocate a part of their investments to products with sustainability characteristics; At least four financial institutions (one per sub-sector) use the model or databases developed in the project to inform decision making or carry out climate action (e.g. shareholder engagement); One financial product designed using the projects model or databases; 1 000 professionals trained by the end of the project; Energy savings of about ~70 GWh/y representing ~7 MtCO2e; 90% awareness of citizens on the concept of environmental impact associated with an investment; and 95% of advertising expenses of the campaign on sustainable finance are financed by the private sector.

    ADMINISTRATIVE DATA


    Reference: LIFE18 IPC/FR/000010
    Acronym: Finance ClimAct
    Start Date: 15/03/2019
    End Date: 31/12/2024
    Total Eligible Budget: 17,729,390 €
    EU Contribution: 9,991,523 €

    CONTACT DETAILS


    Coordinating Beneficiary: Agence de l'environnement et de la matrise de l'energie
    Legal Status: PUBLIC
    Contact Person: Mathieu GARNERO
    Email: Send Email


    LIFE Project Map

    ENVIRONMENTAL ISSUES ADDRESSED

    THEMES

    • Environmental accounting
    • Market based instruments
    • Sectoral adaptation (industry-services)

    KEYWORDS

    • ecolabel
    • certification
    • environmental accounting
    • financial instrument
    • climate action plan
    • climate change adaptation
    • climate change mitigation
    • market-based instruments

    TARGET EU LEGISLATION

    • COM(2011)885 - EU 2050 Energy Roadmap (15.12.2011)

    PARTNERSHIPS

    Name Status Type
     Commissariat general au développement durable-France ACTIVE Participant
     Autorité des marchés financiers-France ACTIVE Participant
     2 Degrees Investing Initiative-France ACTIVE Participant
     Institute for Climate Economics-France ACTIVE Participant
     Autorité de contrôle prudentiel et de résolution-France ACTIVE Participant
     Agence de l'environnement et de la matrise de l'energie ACTIVE Coordinator