Decree Implementing Article 29: Strengthened Environmental Reporting Requirements

The decree implementing Article 29 of the Energy and Climate Act was published on May 27, 2021. While aligning with the European reporting framework, French regulations go a step further in their requirements regarding environmental and climate reporting by investors, thereby allowing France to maintain the lead it established with Article 173 (which Article 29 will replace). The decree provides significant clarity on the information that French financial institutions (portfolio managers and institutional investors) must disclose in their ESG reporting. Among these advances, we can highlight:

1. The Actual Implementation of a Biodiversity Reporting Requirement Starting in 2022 (measuring the biodiversity footprint and the contribution to reducing impacts on biodiversity). The Carbone 4 group welcomes this significant step forward; biodiversity is, in fact, the second major challenge alongside climate change. Carbon4 Finance launched the Biodiversity Impact Analytics database, in partnership with CDC BIODIVERSITY, using the Global Biodiversity Score methodology, which measures the contribution of investment portfolios to pressures on biodiversity and their impacts.
2. Financial institutions will also be required to report on their management of physical risks. Addressing physical risks is at the heart of the Carbone 4 Group’s expertise, as it helps businesses anticipate risks related to the impacts of climate change in order to increase their resilience. The ongoing development of our methodology OCARA, a framework for the operational analysis of corporate resilience to the impacts of climate change, will provide financial stakeholders with a practical tool that goes beyond the scope of voluntary disclosures. Carbon4 Finance Since 2017, it has also been developing a database on physical risks related to investment portfolios: Climate Risk Impact Screening.
3. Improving Climate Reporting : Investors will need to go beyond carbon footprints by specifying their alignment with the temperature goals of the Paris Agreement and setting quantified targets for direct and indirect GHG emissions by 2030.
4. Thresholds and scopes that broaden the scope of application
   With the threshold for assets under management remaining at 500 million euros, virtually all French management companies will be subject to these new requirements starting in 2023, thereby making the reporting process universal.

Thus, while they may not yet be sufficient to spontaneously spur actions commensurate with the environmental and climate challenges, the new obligations imposed on financial sector players will now encourage them to ask themselves important questions, and, in that sense, are a step in the right direction.