Article 173

Legal Framework

The French Energy Transition for Green Growth Act was adopted in August 2015, marking a turning point in terms of ESG (environmental, social, governance) transparency for French investors, particularly through Article 173, which took effect on 1 January 2016.

Article 173 defines the disclosure obligations set for institutional investors (mutuals, asset management companies, banks, insurers, etc.) regarding their incorporation of ESG criteria and, more specifically, how they identify the ESG and climate risks represented by their financial assets.

This is the first Act to require investors to publish an ESG and climate report on their activities. However, it establishes the “comply or explain” principle and thus provides the option of explaining why the investor has not taken ESG and/or climate considerations into account in managing its financial assets.

  1. Obliged entities
    Article 173 applies to two major categories of entities:
    • Institutional investors listed in Article 173:
      • Caisse des Dépôts et Consignations;
      • Insurance and reinsurance companies;
      • Mutuals or unions;
      • Personal protection insurance institutions and their unions, supplementary pension institutions;
      • Ircantec (Supplementary pension institution for non-permanent government and local authority staff members);
      • ERAFP (public institution responsible for managing the mandatory additional pension scheme for the public sector);
      • CNRACL (National pension agency for local authority staff).
    • Asset management companies authorised by the AMF (French Securities Regulator) managing at least one mutual fund listed in Article 173.
    The reporting obligation depends on the company’s balance sheet size. Entities with balance sheet assets exceeding €500 million (or entities belonging to a group whose consolidated balance sheet assets exceed this amount) are required to disclose all information.


    Source : AFG Guide to the Energy Transition for Green Growth Act, applicable to asset management companies, October 2016.
     
  2. Communication media
    Obliged entities are required to publish their disclosures on their website and in their annual report on a yearly basis, covering all information on how they incorporate ESG criteria in managing their assets and the resources implemented to contribute to the energy transition.

    Mutual funds are required to include these disclosures in an annual report or in an appended annual report.


For more information, please refer to Article 173 of the Energy Transition for Green Growth Act and its implementing decree.