AMF France, the financial market regulator of France, proposed, to include into European Law, the minimum environmental requirements that financial products must meet to be classified in context of Article 8 or Article 9 under the Sustainable Finance Disclosure Regulation (SFDR). Additionally, the French Prudential Supervisory Authority (ACPR) published reporting updates for the banking sector.
Proposal on Minimum Environmental Criteria Under SFDR
In its review, AMF France has proposed to introduce the minimum criteria concerning environmental impact for financial products in the European Law categorized under Article 8 or Article 9 of the SFDR. The SFDR regulation, adopted in 2019, was designed by the European Union co-legislators and the Commission as an Environmental, Social and Governance (ESG) transparency regime for financial entities and products. The SFDR regulation requires financial market participants to publish information on their sustainability communications and practices, however it does not impose minimum requirements or define the concept of sustainable investment. In order to avoid ambiguity and to better meet the expectations of savers, AMF France draws on existing market practices and regulations and sets out following recommendations which could be implemented very quickly in European Law and would be a useful addition to the current regulatory framework:
- Minimum environmental criteria should be established for the classification of products as Article 9 or Article 8. Compliance with these criteria would be subject to national supervision. The criteria for Article 9 should continue to be more stringent than those for Article 8.
- A minimum proportion of portfolio assets for Article 9 funds should consist of investments aligned with the Taxonomy. This percentage could increase over time as the European economy advances towards sustainability.
- Financial market participants that manage Article 8 and 9 funds should adopt a binding ESG approach in their investment decision-making process. The EU framework for minimum criteria should identify a set of acceptable ESG approaches that can be implemented by financial players.
- Article 9 funds should exclude investments in fossil fuel activities that are not aligned with the European Taxonomy. Investment in such activities would be possible for Article 8 products provided that they meet strict conditions that ensure that these activities are engaged in an orderly transition.
In a more exploratory approach, AMF France also proposes to introduce the concept of transition and engagement policies. The regulator has identified possible avenues for a quantitative definition of assets in transition. With this, AMF France aims to make a constructive contribution to a new phase of European regulation on sustainable finance.
Reporting Update for Banks
ACPR modified the Functional Business Cards of its information system to integrate the developments from the Decree 03/2023. The modified version incorporates changes related to the repeal of the EBA/GL/2020/07 guidelines on COVID-19 reporting by the European Banking Authority (EBA), and the implementation of instruction 2022-I-15 relating to the declaration of additional information applicable to class 2 and 3 investment firms and investment holding companies relating to FINREP statements. With regard to REMUNERATION collection, a dedicated communication will be published, and the Functional Business Cards will be updated in the coming weeks.
Related Link (in French and English): Update on Functional Business Cards
Keywords: Europe, France, Banking, ESG, Climate Change Risk, Sustainable Finance, SFDR, Reporting, Remuneration, ACPR, AMF France
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