The Banque de France is deeply committed to helping to achieve these goals and to promoting the growth of sustainable finance more generally. In fact, playing a role in assessing, mitigating and managing the impact of climate‑related risks on the real economy and the financial system is now an integral part of the mission entrusted to central banks under both their monetary strategy and financial stability responsibilities. In 2020, the European Central Bank (ECB) launched a strategic review of its monetary policy, which included the topic of greening its policy. Back in 2017, the Banque de France spearheaded the creation of the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), for which it acts as the permanent secretariat. The NGFS, which now boasts over 80 members, published ten reports in 2020, underlining the importance of climate and sustainability issues for central banks and financial supervisors. In addition to its engagement at European and international levels, the Banque de France is making changes throughout its own operations, with steps to cut its greenhouse gas emissions, incorporate environmental, social and governance (ESG) analyses in company scoring, and integrate climate change‑related risks into the supervision of French financial institutions. In late 2020, the Autorité de contrôle prudentiel et de résolution (ACPR – Prudential Supervision and Resolution Authority) published its first joint report with the Autorité des marchés financiers (AMF – Financial Markets Authority) on the climate‑related commitments of French financial institutions. This was preceded by a report on coal policies.
The Banque de France has pursued an ambitious responsible investment approach since 2018. It incorporates climate issues as well as ESG questions more broadly in the management of asset portfolios for which it has full and complete responsibility, namely its own funds and pension liabilities investment portfolios (approximately EUR 23 billion). The Banque de France aims to limit the exposure of its assets to climate risks while also taking account of the impact of its investments on the environment, in keeping with the double materiality principle promoted by the European Union. In particular, it intends to align its portfolios with a sub‑2°C global warming trajectory while helping to finance the energy and ecological transition.
In 2020, the commitments made under this responsible investment strategy were met and expanded. Accordingly, the Banque de France will exit coal completely by 2024, significantly limit its investments in oil, gas and unconventional hydrocarbons, and oppose any new development project involving the use of fossil fuels by companies in which it holds shares. In addition, the Banque de France has now begun integrating biodiversity – a relatively new subject for the financial sector – in the analysis of its portfolios’ ESG performances. The Banque de France also took steps to strengthen the social side of its responsible investment strategy, responding to the need to bolster the “S” of ESG amid an unprecedented health, social and economic crisis.
This document reports, for the third consecutive year, on the execution of the Banque de France’s responsible investment strategy. The Banque de France remains one of the few central banks to publish a report devoted to responsible investment. In February 2021, Eurosystem central banks adopted a joint position in which they committed to implementing climate change‑related responsible investment strategies for non‑monetary policy portfolios. They will report on this from 2022 or beginning of 2023 onwards. Transparency is essential, a fact reflected in the efforts by French and European lawmakers and supervisors to define the ESG disclosure framework for financial institutions and companies. This transparency push is further supported by the 2017 recommendations issued by the Task Force on Climate‑related Financial Disclosures (TCFD), which are now widely followed. For institutional investors, transparency on extra‑financial issues should make it possible to gather detailed and robust ESG data on the impacts of issuers’ activities. These data should be comparable, reliable and universally accessible without disproportionate costs. To this end, European rules to ensure standardised public extra‑financial disclosures and a single electronic dissemination format are crucial.
The Banque de France is conveying these messages at the domestic, European and international levels and wants to set an example among central banks by publishing a report detailing its results and methodologies. Its report is also being shared on the Climate Transparency Hub launched in 2021 by the French Environment and Energy Management Agency (ADEME) and the General Commissariat for Sustainable Development (CGDD).
