French regulators are stepping up the pressure on coal project lenders and investors, and have published their first report on the coal policies for market participants. In July 2019, at a meeting of representatives of the Paris financial marketplace chaired by Finance Minister Bruno Le Maire, the Autorite de Controle Prudentiel et de Resolution (ACPR - French Prudential Supervision and Resolution Authority) and the Autorite des Marches Financiers (AMF) announced a framework to monitor and evaluate climate-related commitments made by banks, insurers, and asset managers.
Sustainable finance is a major theme for the Paris financial centre, and the publication of the first joint report confirms a positive impetus, even if areas of improvement have been identified. The full report is scheduled to be published by year-end.
The report was based on public information and questionnaires sent to market participants, including nine banks, 17 insurers and 20 asset management companies. It includes a qualitative comparison of the policies, an assessment of the divestments and exposure of French banks, insurers and funds to the thermal coal sector at the end of 2019, and an analysis of coal-exposed issuers included in fund portfolios.
The banking and insurance institutions analyzed in the report all have a policy for phasing out coal. Among them, six banks and 11 insurance companies have published exit dates.
Of the 20 major asset management companies, 16 have a coal policy and only one participant does not wish to adopt any such policy because of its investment portfolio. Only six of the 20 companies have announced a coal exit date. Still, the financial sector has a relatively low exposure to the coal business.
According to the AMF and ACPR, these analyses highlight the financial sector’s awareness of its responsibility in the fight against climate change. Nevertheless, certain aspects of the firms' strategies need to be more systematically specified, in particular the time horizon for the exit from coal. Efforts to monitor exposures – at the individual and marketplace level – must also be strengthened.
Following this first exercise, the ACPR and AMF recommend that financial institutions: formulate coal policies, including notably the adoption of an exit date; justify the criteria and thresholds used in these policies and, if necessary, consider additional criteria in the policies to achieve the exit objective; increase the transparency of coal policies, in particular by clarifying applicable exemptions; clarify how financial institutions take into account companies that are in transition and/or with an intention or commitment to exit coal; improve individual monitoring of exposures and continue efforts at the level of the Paris financial centre in terms of harmonization of methodologies; and specify the data used for policy implementation and monitoring.
The AMF is the French financial markets regulator. The ACPR is the administrative authority operationally attached to the Banque de France that supervises the banking and insurance sectors and ensures financial stability. It also has resolution powers.