Will “say on climate” votes soon be mandatory in France?

Before suspending its work for the summer recess, the French parliament has debated the introduction of a mandatory “say on climate” shareholders’ vote for French listed companies.

This discussion stemmed from an amendment tabled by certain members of the Parliament as part of the examination of a proposed draft law containing various measures aimed at making France the leader of “green” technologies and decarbonising existing industries (so-called draft law on “green industry”).

The amendment was adopted by the Assemblée Nationale despite the opposition of the Government and has thus been included in the draft law which remains subject to further examination (see "Next steps” below).

This amendment provides that for French companies listed on a regulated market:

• the board of directors shall adopt a “strategy” on climate and sustainability - this strategy shall be in the corporate interest of the company, consider the social and environmental impacts of the business and be embedded in the company’s commercial strategy;
• the strategy on climate and sustainability shall be the subject of a non-binding shareholders’ vote every three years (as well as in case of a material change to the strategy);
• the board of directors shall then prepare a report each year on the implementation of that strategy, and the report shall also be the subject of a non-binding shareholders’ vote each year.

In each case, the required majority is 50% of the voting rights (i.e. an ordinary decision). 

In case of a negative vote, the board of directors would be required to consider this outcome. The proposal does not impose any further specific obligation on the company’s board of directors in case of a negative vote, which is the reason why the proposed regime is referred to as non-binding or advisory only. In practice, the board of directors is likely to review its strategy or its implementation and consider any changes following the negative vote.

The content and disclosure requirements for both the strategy on climate and sustainability and the board’s report on its implementation would be specified in further regulations to be adopted by the Government (via a decree).

Next steps

The draft law will now be examined in October by a commission involving representatives of the two chambers of the French Parliament (Assemblée nationale and Sénat) and then follow the remaining steps of the legislative procedure.

If the “say on climate” amendment survives those remaining steps, which is not certain yet, this new mandatory regime will be a significant reform for French listed companies and their investors. In contrast, in 2023 so far, “only” nine French companies have had a “say on climate” vote.

This reform will also attract interest from other countries as France would be one of the first to impose a “say on climate” shareholders’ vote.

This hybrid regime based on a non-binding shareholders’ vote also reminds us about the introduction of the “say on pay” regime in France a decade ago (initially through the corporate governance code)… which eventually became a binding vote a few years later.