France: ESG “back to school”

After the summer break, how about a refresher on what you need to know regarding the latest developments on sustainable finance, with a focus on France, especially as 2023 is already proving to be a very busy year for ESG regulation.

February 2023 

AMF Position Paper: Ahead of the review of the EU SFDR, this AMF position paper sets out proposals to introduce minimum environmental requirements to be met by Article 8 or Article 9 SFDR products (e.g. minimum proportion of Taxonomy-aligned investments; exclusion of fossil fuel activities that are not Taxonomy-aligned for Article 9 funds). See our blog post for more information.

May 2023 

ESAs consolidated Q&As on SFDR: ESMA has published a consolidated Q&A on SFDR, which includes the Commission Q&A published on 6 April 2023, the ESAs Q&A from 17 November 2022, the Commission Q&A from 17 May 2022 and Q&A from 14 July 2021. This consolidated document does not provide any new guidance or interpretation.

June 2023 

ESAs presentation of a common understanding of greenwashing and warning of related risks: The ESAs have developed a common high-level understanding that greenwashing is "a practice whereby sustainability-related statements, declarations, actions, or communications do not clearly and fairly reflect the underlying sustainability profile of an entity, a financial product, or financial services. This practice may be misleading to consumers, investors, or other market participants." See EBA report, ESMA report, and EIOPA report.

AMF summary of SPOT inspections on compliance with non-financial contractual commitments: The AMF reviewed the systems for defining, managing and controlling these commitments by portfolio asset management companies (representative sample) and identified good/poor practices.

EU Commission Proposal to regulate ESG rating providers: This proposal provides for authorization and new rules covering all ESG rating providers in the EU and from third countries (if they provide ratings within the EU). See our blog post for more information. 

EU Commission sustainable finance package including:

• a Commission staff working document (overview of regulatory sustainable finance framework and actions taken to enhance the usability of the Taxonomy);
• a recommendation on transition finance;
• a proposal for the regulation of ESG ratings providers (see above);
• Taxonomy Delegated Acts which contain technical screening criteria for the remaining four environmental objectives under the Taxonomy Regulation (“Taxo4”) and amend the existing Taxonomy Climate Delegated Act to include climate adaption and mitigation technical screening criteria for additional economic activities (some manufacturing and transitional activities in the transport sector);
• FAQs on the EU Taxonomy aiming at providing “clarifications” on the interactions between SFDR SI and Taxonomy alignment; and
• a Taxonomy User Guide to help non-financial and financial undertakings to assess their Taxonomy eligibility and alignment.
• For more information on this package, see our blog post. 

The AFG has responded to the ESMA call for evidence on greenwashing: They have notably pointed out that: (i) a distinction between intentional and non-intentional greenwashing must be made (non-intentional greenwashing should not be sanctioned); (ii) it is necessary to take into account existing requirements (MiFID, AIFMD, UCITS); (iii) it is key to have a consistent interpretation among the different authorities (regulators will have a key role to play); (iv) at this stage, market players are highly dependent on data providers; (v) investor education is key; and (vi) works elaborated by the French market are to be considered to reduce greenwashing (e.g. AFG handbooks, 29LEC, AMF-Position-Recommendation DOC-2020-03).

July 2023

The AFG has replied to the ESAs consultation on the review of SFDR: Following the ESAs’ Joint Consultation Paper (in April 2023), the AFG has raised the need to have: (i) consistency between the SFDR and CSRD (e.g. non-financial standards/indicators (ESRS)); and (ii) a consistent approach for the treatment of derivatives. They also commented on the methodologies/PAI calculation and proposals to simplify the SFDR RTS Annexes.

ESAs held a public hearing to present proposals and answer questions about the draft amendments to the SFDR RTS: See presentation and recording here.

ESMA call for evidence on MiFID II suitability and sustainability: The objective of the call for evidence should be to provide answers on how firms apply the MiFID rules on sustainability. The call for evidence closes on 15 September 2023.

CSRD Delegated Act published by the EU Commission (first set of ESRS with Annex I and Annex II): The Commission has published the final version of the European Sustainability Reporting Standards (ESRS), which specify the sustainability information that companies will need to report under the CSRD, including information under the SFDR. The final ESRS include significant revisions to the draft standards recommended by the EFRAG in November 2022. The EU Parliament and Member States now have until 21 October to adopt or reject this text. They do not have the power to amend the text. For more information, see our blog post. 

Announcement by ESMA of a Common Supervisory Action with NCAs on sustainability-related disclosures and the integration of sustainability risks: The Common Supervisory Action (CSA) will be conducted throughout the remainder of 2023 until Q3 2024. One of the main objectives is to gather further information on greenwashing risks in the investment management sector, which will provide input into ESMA’s final report on greenwashing.

AMF study on the readability and comprehension of non-financial information provided for responsible investments: Since 1 January 2023, the AMF has conducted this study on information annexed to the prospectuses of Article 8 and Article 9 SFDR funds.

Submission of the final proposal to revise the French SRI Label to the French Ministry of Economics and Finance: The official publication is expected at the end of September 2023 but some journalists say there may be 1 month delay as the final version is still under discussions. This proposal elaborated by the Label Committee notably includes some alignment with the SFDR, such as a new requirement to systematically consider the double materiality of the E, S and G aspects (based on SFDR tools/definitions).

August 

Integration of ELTIFs in the scope of the AMF ESG Doctrine: The AMF Position-Recommendation DOC-2020-03 has been updated to include in its scope French and foreign ELTIFs marketed to retail investors in France. French ELTIFs taking the form of collective investments schemes that are already accessible to retail investors were therefore subject to these provisions, unlike foreign ELTIFs that were not explicitly covered by this policy.

September 

EU Commission has published its consultation on the implementation of SFDR: The aim is to understand how the SFDR has been implemented and any potential shortcomings, including its interaction with other parts of the European sustainable finance framework. Respondents have until 15 December 2023 to provide their input. See our blog post for more information.

The French Ministry of Justice has announced that the CSRD will be transposed into French law in early December, making France the first EU member state to set a deadline for the implementation of the Directive. All EU member states are required to transpose the Directive into their national law and bring into force the necessary regulatory and administrative provisions by July next year. For more information on the CSRD, see our CSRD demystified materials.