"Energy Transition and Climate Risks Included in New French Financial Disclosure Rules", 5 Mar 2016

New rules make France a leader in national and international efforts to integrate factors related to climate change into financial disclosure requirements…[T]he French Treasury Department published Decree no. 2015-1850...The Decree imposes a number of reporting requirements on institutional investors and financial asset managers headquartered or registered in France. It anticipates—but also goes further than—the EU-wide disclosure requirements due to take effect in 2017 pursuant to Directive 2014/95/EU, issued by the European Parliament and Council in October 2014...[F]inancial firms that have registered as financial asset managers in France must comply, meaning that the Decree affects not only French financial entities but also those registered in France but headquartered abroad, like Allianz IG and Deutsche Bank’s asset management group. In additional to financial firms, the rule also encompasses French industrials such as Électricité de France and Total S.A., as well as French subsidiaries of foreign industrials and industrials headquartered abroad but registered to do business in France...[E]ntities subject to the Decree must indicate how the companies in which they invest provide information to investors, shareholders, clients, beneficiaries, etc. about environmental, social, and governance (ESG) factors...[E]ntities subject to the decree must disclose “climate risks,” meaning (1) physical risks arising from climate change, such as sea level rise, and (2) “transition risks,” like those that attend investments in assets likely to become “stranded” or suddenly de-valued as a result of efforts to derive energy from non-fossil resources...The Decree also requires disclosure of the methodologies used by reporting entities to arrive at their characterization of investee companies’ policies and climate risk exposure...