French institutional investors to disclose carbon footprint

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The recently approved law setting in place the energy transition in France will oblige French institutional investors to disclose the carbon footprint of their portfolios.

In addition, French institutional investors will have to measure their “green part”, defined as the part of their portfolios invested in assets that already include the reduction of greenhouse gas emissions.

They will have to take those requirements into account in their reports from the fiscal year closing on 31st December 2016.

Four of the largest French institutional investors – The Caisse des Dépôts, the Erafp, the FRR and the Ircantec – managing €82bn of assets have already announced their engagement for more responsible investment.

Michel Sapin, the French minister of Finance, who has announced the requirements during the Climate Finance Day in Paris, said in his speech that the financial system must consider climate risk.

Commenting on the requirements, Sebastien Thévoux-Chabuel, ESG analyst at Comgest, said  : “We fully support the recent move by the French government to ensure that carbon reporting is mandatory. This, along with recent shareholders’ engagement at various AGMs of the largest oil majors, demonstrates an encouraging trend of increasing transparency requirements by investors on important environmental issues.

Thévoux-Chabuel explained that Comgest, performing regular carbon footprint analysis of selected portfolios, does not invest in fossil fuel companies due to the lack of visibility over future earnings.

“We believe that this sector is likely to follow some of the same problems that the banking sector experienced in 2008.

“A decade ago, academics and others warned that banking practices were risky and unsustainable.  Through extensive lobbying and political connections, the banks were able to largely silence those voices.

“Even though a looming crisis was inevitable, the timing of it was difficult to predict, and so politicians and regulators did little for fear of hurting the economy. Investors suffered severe losses when the economy collapsed during the crisis and it was civil society that paid the highest price.

“Now, just replace “banks” with “fossil fuel companies”, and it is easy to understand why it is high time politicians and investors use their leverage to avoid another type of crisis. I am reminded of the statement, With great powers come great responsibilities. If not them, who? If not now, when ?” Thévoux-Chabuel concluded.

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