Strategy

Climate change was one of six major challenges identified during the collective, forward-looking approach used to draw up our corporate plan. Adopted in 2021, “Building 2024 Together” seeks to strengthen our capacity to discharge our tasks (ensure monetary stability, preserve financial stability, provide services to the economy and society), while taking into account the consequences of these major challenges: it lists 30 new priority actions organised around four strategic objectives, the fourth of which is devoted to sustainable internal performance.
 

In all, five actions are focused on priority initiatives designed to get our institution ready for the physical and transition risks linked to climate change:

• Adapt monetary policy operations to climate risks
• Ensure the financial sector takes better account of climate-related risks
• Assess the feasibility of incorporating climate risks into the company ratings process
• Actively commit to carbon neutrality
• Aim for digital sobriety in all our digital uses
   

Deliverables for these five action areas are tracked by the indicators described in the chapter on metrics and targets.
 

The Bank has also pursued a corporate social responsibility (CSR) programme for many years. Among other things, it launched an ambitious responsible investment policy in 2018 with the publication of a Responsible Investment Charter, which it plans to develop further.
 

The Banque de France's strategy forms part of bold carbon emissions reduction targets adopted by the European Union (EU) and aimed at cutting emissions levels by 55% by 2030 relative to 1990 and achieving carbon neutrality by 2050. The Eurosystem is making an extensive contribution to these efforts and aims to align its actions with advances in the EU's policy and initiatives in this area.

Under their financial stability mandates, the Banque de France and the ACPR are taking steps to better understand the exposure of France's banking and insurance sectors to these risks and to ensure that they are capable of facing up to them. From a micro and macroprudential supervisory perspective, the main climate-related risks are the climate risks borne by French institutions. These risks therefore need first to be assessed more effectively through the long-term forward-looking view afforded by stress testing of banks and insurers. The question of additional capital requirements could be raised once all the risks are known, at French and European levels, and supplemented by the publication of transition plans of individual institutions.
 

The Banque de France and the ACPR are prioritising efforts to standardise climate stress tests and make them more reliable, in order to promote their widespread use as supervisory tools. Assessing the financial risks posed by climate change will also entail strengthening collaboration with the academic world by taking a multidisciplinary approach to the most relevant issues for the financial sector. The scope of risks being researched needs to be widened gradually beyond climate risk to include the impacts on the financial sector of risks related to nature and biodiversity loss.

Climate change and the policies put in place to support the transition to a low-carbon economy are leading to a deep transformation of the economy. As a public institution, the Banque de France is involved in adopting and setting up an appropriate regulatory framework, to enable it to continue discharging its tasks. By virtue of its positioning within the financial ecosystem and at the heart of the French and European economy, the Banque de France can also use its influence to promote a greener financial sector, at home and abroad.
 

With this in mind, the Banque de France is prioritising continued efforts to invest for the NGFS, which is producing leading-edge work at international level on the procedures used by central banks and supervisors to integrate climate risk. A founding member of the network, the Banque de France acts as its secretariat, providing around 15 employees and hosting experts seconded from NGFS member institutions.
 

To analyse the financial risks linked to climate change, standardised and comparable data on company performances are needed. The Banque de France and the ACPR are involved in work at European and international levels to build an extra-financial reporting framework. They are promoting European disclosure standards for climate risk exposure that can be transposed to the international level, while supporting their proper application at domestic level.
 

As an investor, the Banque de France can also be part of helping to foster greener financial markets. In this regard, the financing needs linked to the climate transition are enormous, with at least EUR 350 billion in additional annual investment needed to meet Europe’s goal by 2030. The responsible investment approach adopted by the Banque de France since 2018 for a portion of its portfolios illustrates how an investor can implement this kind of approach and in so doing have a knock-on effect on the wider community of central banks and investors; with this experience, the Bank has also gained a better understanding of the practical issues and challenges entailed in putting such an approach into practice, allowing it to make a richer contribution to national and international discussions on ways to promote a greener financial system.
 

Research plays a decisive role in better understanding the financial issues linked to the effects of climate change, but also in exploring ways forward in terms of recognising these issues in the activities of the Banque de France and the ACPR. The in-house “Climate Research network” is pursuing an ambitious research agenda bringing together researchers from across all the Directorates General. Over 50 research projects are being conducted internally. Also, since 2019, the Banque de France has awarded prizes to young researchers working on green finance.