Climate change and sustainable finance

Climate change, the necessary backdrop to our missions

Climate change matters for central banks because it affects growth and price stability. This is why the Eurosystem is committed to taking full account of the implications of climate change for monetary policy and central banking. The Banque de France was a major contributor to the ECB strategy review, finalised in July 2021, which formalised this objective. It also continues to work within the Eurosystem to implement its shared action plan. 

As part of their mission to preserve financial stability, the Banque de France and the Autorité de Contrôle Prudentiel et de Résolution (ACPR) work to better understand how French banks and insurers are exposed to climate-related risks. They also ensure that financial institutions are capable of addressing these threats.

The Banque de France is a key player in the greening of the financial system

The Banque de France contributed to the launch of the Network of Central Banks and Supervisors for Greening the Financial System or NGFS. The network groups together over 140 member institutions and helps central banks and supervisors to incorporate climate challenges and ensure they are properly accounted for by the financial sector.

The Banque de France (along with the ACPR) contributes to the NGFS, but also uses its research to build macro-financial scenarios for financial sector climate stress tests, improve its supervisory practices and responsible investment policy, and develop its climate reporting.
 

The Banque de France is helping to promote sustainable finance

The Banque de France has also incorporated climate concerns into its services to the economy. It is examining ways of including climate risk in its company ratings system and has developed a prototype indicator to measure companies’ exposure and how well they manage these threats. As the steering body for France’s national financial literacy strategy (EDUCFI), the Banque de France also organises training and information sessions on sustainable finance for the general public (especially for students and financial professionals).

The Banque de France is a responsible investor

Since 2018, the Banque de France has applied a responsible investment approach to its proprietary investments. This covers two asset portfolios: its own funds portfolio and its pension liabilities portfolio. 

The approach is built on three pillars, broken down into six objectives:

• Pillar 1: the Banque de France aligns its investments with France’s climate commitments
  • by aligning the equity components of its asset portfolios with a trajectory compatible with global warming of less than 1.5°C by 2025
  • by buying green bonds and investing in thematic funds with a focus on the energy and ecological transition (EET)
• Pillar 2: the Banque de France includes environmental, social and governance (ESG) criteria in its asset management
  • by excluding 20% of its equity investment universe based on ESG criteria and scores
  • by excluding companies whose involvement in fossil fuels is incompatible with France’s climate commitments
• Pillar 3: the Banque de France exercises its voting rights with companies in which it holds shares and engages with issuers
  • by adopting a voting policy that includes extra-financial provisions; for example, it expects companies to disclose information on the environmental impact of their activities
  • by aiming for a general meeting attendance rate of at least 80% in order to exercise its influence as a shareholder

Research

The Banque de France conducts research on climate-related public policies and on the economic and financial issues linked to climate change. Its aim is to improve its own actions in this field, but also to increase collective knowledge of the impact of climate risks on the economy, the financial sector and the financing of the low-carbon transition. 

The Bank is developing a research agenda to be conducted by an internal “climate and green finance” network of researchers from its different departments. Since 2016, it has organised an annual academic conference on climate-related topics and, since 2018, has awarded an annual prize to young researchers working on green finance.

International work

The Banque de France and the ACPR participate in initiatives at the European and international levels: Financial Stability Board, Basel Committee on Banking Supervision, International Association of Insurance Supervisors, G7, G20, etc.

As founding members of the NGFS, the Banque de France and ACPR contribute actively to the network's three objectives: to share best practices between peers, to contribute to the development of environmental and climate-related risk management in the financial sector, and to increase the financial sector’s commitment to the transition toward a sustainable economy. The ACPR is also a member of the Sustainable Insurance Forum which deals specifically with issues related to insurance.

The Climate Change Centre (CCC)

Created in 2021 by the Banque de France, the CCC’s missions include:

• Coordinating actions undertaken by the Bank's departments in the field of climate risk management
• Analysing climate-related risks to the financial sector, in collaboration with industry experts from the Banque de France and ACPR
• Serving as the secretariat for the NGFS

The CCC's goal is to accelerate the inclusion of climate concerns in the Banque de France's activities, so that it can continue to act as a driving force with it partners, central bankers and supervisors.