In terms of responsible investment, in 2021, for the first time – and a year ahead of schedule – the Banque de France aligned its pension liabilities investment portfolio with a 2°C temperature trajectory. Keeping up the commitment to fight global warming, the Bank will progressively lower this trajectory to 1.5°C for its own funds and pension liabilities portfolios. Further, by late 2022, the Banque de France will begin publishing a climate report covering the entire span of its activities, in keeping with the recommendations of the Task Force on Climate‑related Financial Disclosures (TCFD). On a broader note, the commitments made by central banks reflect a growing awareness about climate challenges, and while they cannot be the main driver of change, central banks are now fully engaged in tackling these issues. The European Central Bank (ECB), for example, incorporated climate considerations into its monetary policy strategy review, which led to the approval of an ambitious action plan by the Governing Council in July 2021. Actions contained in the plan include modelling of the effects of climate change on prices and growth, enhanced climate transparency by counterparties with regard to collateral and securities purchase programmes, and climate stress tests for the Eurosystem balance sheet. In February 2021, Eurosystem central banks also pledged to implement a climate change‑related responsible investment approach in euro‑denominated non‑monetary policy portfolios by  2023, and to report on the results. This commitment was expanded in summer 2021 to corporate sector purchase programmes (CSPPs).

But Eurosystem central banks are not the only ones joining the movement. Illustrating this, the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) continues to grow and now boasts more than 100 members. The Banque de France, which spearheaded the initiative to set up this network in 2017 and acts as its permanent secretariat, plays a frontline role in the NGFS. This reflects our conviction that contributing to the effort to assess, mitigate and manage the impact of climate‑related risks on the real economy and the financial system is now part and parcel of the mission entrusted to central banks under their monetary strategy and financial stability mandates.

Integrating the fight against climate change as we execute our missions and manage our investments will remain a core priority for us in the coming years and we shall remain steadfast and determined. However, the Banque de France’s responsible investment strategy needs to be expanded and enriched to incorporate other critical themes in order for us to be as comprehensive and consistent as possible in our approach. In the first Report on Biodiversity and Climate Change published in June 2021, scientists from the Intergovernmental Science‑Policy Platform on Biodiversity and Ecosystem Services (IPBES) and the Intergovernmental Panel on Climate Change (IPCC) stressed the importance of the connections between climate and biodiversity. Given that global warming is a major contributing factor not just in the damage being done to ecosystems but also in declining biodiversity, many positive synergies could be unlocked if these challenges were addressed in a complementary manner. Conversely, taking a silo approach to these issues could support climate change adaptation solutions with a harmful impact on biodiversity, or overlook the natural world’s essential carbon storage contribution. The 2022 international agenda reflects growing recognition of these connections, with scheduled events including, in the first half of the year, the One Ocean Summit, a new Earth Summit and the second portion of the COP15 on biodiversity. The Banque de France plans to play its part in building awareness by contributing to work by the Task Force on Nature‑related Financial Disclosures (TNFD) to develop a common framework for assessing and monitoring the financial risks linked to the decline of biodiversity. At the same time, we are stepping up our own commitment to biodiversity through thematic investments aimed specifically at preserving our ecosystems.

We also intend to enhance the social and societal component of our responsible investment approach. In 2021, the bond purchase programme was expanded to include social and sustainable bonds, in an effort to strengthen the strategy’s social component. In 2022, the Bank will keep up these efforts by investing in funds and projects with a social impact, in addition to thematic investments aimed at fighting global warming and protecting biodiversity.

For the fourth consecutive year, this document reports on the execution of the Banque de France’s responsible investment strategy. It describes the results obtained and the methodologies used. This transparency is more crucial than ever, at a time when companies and investors are making huge efforts in relation to climate data, in connection with the enhanced requirements established by French and European lawmakers. Reflecting its determination to foster continuous improvement, the Banque de France intends to strengthen its transparency approach in the coming years by developing the engagement component of this report, with a particular focus on execution of the voting policy. This report is also being shared on the Climate Transparency Hub launched in 2021 by the Agency for Ecological Transition (ADEME) and the General Commissariat for Sustainable Development (CGDD).