Sustainable Finance and CSR by the ACPR

A few days ago, we announced our series of articles “DEVLHON Consulting Deciphers” in connection with the ACPR’s 2023 Annual Report.

Here is our second article related to the ACPR report, on sustainable finance and Corporate Social Responsibility (CSR).

Sustainable Finance and CSR: Initiatives and Supervision of Climate Risks by the ACPR

In 2023, the Autorité de contrôle prudentiel et de résolution (ACPR) intensified its efforts in sustainable finance and Corporate Social Responsibility (CSR). Integrating climate risks into the supervision of financial institutions and improving transparency on environmental, social, and governance (ESG) criteria have been at the heart of the ACPR’s initiatives this year.

Supervision of Climate Risks

The ACPR has implemented several measures to supervise and mitigate climate risks. In 2023, it launched a new climate stress test exercise dedicated to insurers. This exercise aims to assess the potential impact of climate risks on insurers’ activities, taking into account forward-looking and short-term scenarios. The results of these stress tests will provide a better understanding of insurers’ vulnerabilities to climate risks and guide future supervisory actions.

Additionally, the ACPR has been actively involved in European discussions on climate transition plans. It collaborated with European authorities to define the content of these plans and develop an appropriate supervisory framework. The goal is to integrate transition plans into prudential regulation and the supervision of banks and insurers, thereby ensuring proactive management of climate risks.

ESG Transparency and Reporting

Transparency from financial institutions regarding their consideration of ESG criteria is essential for sustainable finance. The ACPR has overseen insurers’ reports on the integration of environmental, social, and governance criteria, in accordance with Article 29 of the Energy-Climate Law of November 8, 2019. These reports must detail how insurers consider climate and environmental risks in their risk management.

Simultaneously, the ACPR has created an internal reflection group, the CAP (Collective Action for the Planet), to promote a culture of climate and environmental risks within the organization. This working group aims to rapidly and widely disseminate knowledge and best practices in climate risk management.

Awareness and Training Initiatives

In 2023, the ACPR participated in several initiatives to raise awareness among financial sector players about climate issues. It took part in a climate hackathon organized by the Bank of France, the Bank of Italy, the European Central Bank (ECB), and the European Commission. This event stimulated innovation and developed practical solutions to integrate climate risks into financial activities.

Challenges and Perspectives

Supervising climate risks and promoting sustainable finance pose several challenges. Financial institutions must adapt their risk management models to integrate climate risks, which may require significant investments in resources and skills. This includes, for example, advanced technological resources such as sophisticated climate modeling tools and robust data management systems. The necessary skills include climatology experts, sustainability analysts, and professionals trained in green finance. Moreover, the quality and consistency of ESG reports need to be improved to ensure effective and useful transparency.

In the long term, the ACPR’s initiatives in sustainable finance and CSR should contribute to strengthening the financial sector’s resilience to climate risks. Better management of these risks and increased transparency will better protect investors and the public while supporting sustainability objectives.

Conclusion

The year 2023 marked a significant milestone for sustainable finance and CSR under the supervision of the ACPR. The initiatives aimed at integrating climate risks into supervision and improving ESG transparency demonstrate a strong commitment to more sustainable finance. The ACPR’s ongoing efforts will help bolster the financial sector, making it more resilient and responsible, capable of facing future climate challenges.

These developments are detailed in the ACPR’s 2023 Annual Report, which highlights the efforts made to promote sustainable finance and integrate climate risks into financial supervision.