What the French Energy Transition Law means for investors globally
May 04, 2016
The PRI has published an analysis of Article 173 of the French Energy Transition for Green Growth Law, which came into effect on 1 January 2016.
The law sets out a roadmap to mitigate climate change and diversify the energy mix. It marks a turning point in carbon reporting, strengthening mandatory carbon disclosure requirements for listed companies and introducing carbon reporting for institutional investors.
Due to its pioneering nature, the law has picked up interest across the globe. We recommend that signatories around the world understand how they would respond to such a law, including by measuring and disclosing their emissions exposure.
The specific requirements of the legislation as well as the enabling factors that contributed to it becoming a reality in France are highlighted in the PRI analysis, which reveals that the legislation is flexible in its implementation, leaving investors to establish the most appropriate methodologies for themselves. This open-endedness has raised challenges, but it also gives the industry the freedom to shape the processes that will eventually become a norm for the industry in France.
The PRI also makes the following recommendations for investors and policy makers in light of the law.
Recommendations for investors:
- Understand how you would respond to the French law
- Monitor global policy developments to understand trends.
- Actively contribute to policy discussions through investor networks including the PRI and The Global Investor Coalition on Climate Change.
- Take voluntary action in good practice risk management and reporting, for example through the Montréal Carbon Pledge or Portfolio Decarbonization Coalition.
- Collaborate to drive up industry standards.
- Measure and prepare to disclose yourn emissions exposure.
Recommendations for policy makers:
- An early dialogue with industry in policy discussions provides them with an opportunity for formal and informal feedback.
- Encourage and support voluntary industry action, for example disclosure of portfolio carbon footprints.
- Engage with civil society groups to establish their role in implementating regulation.