28 October 2019

EurActiv: French financial sector poorly accounts for climate risks, says Bank of France

Beyond the crucial role of France’s financial sector in the shift towards more sustainable growth and the social responsibility of companies, the sector can also lead to a significant devaluation of certain assets.

But the sector has not yet fully grasped the implications of climate change, even though these cannot be ignored, said the Bank of France.

The French Prudential and Resolution Authority (ACPR), an independent administrative authority backed by the Bank of France, has indeed analysed the data of the banking and insurance institutions it supervises.

In particular, it is responsible for supervising the implementation of extra-financial reporting by insurers according to Article 173 of the country’s Energy Transition Law.

 “Despite some progress, climate change is still partially and heterogeneously integrated into the risk management process of financial institutions,” Sébastien Diot and Anne-Lise Bontemps-Chanel summarised in the note.

But not all of them go at the same pace. There are so-called “advanced” institutions, generally the major international banking groups, as well as some “specialised” ones, which have integrated climate issues into their risk management.

And there are so-called “attentive” ones. These include retail banks, which are mostly operational in France but are nonetheless in arrears due to the lack of resources allocated internally to “problems that are not yet considered as priorities due to their lack of immediate materiality”.

The ACPR also noted that “the assets of banks and insurers are not very exposed [to physical risk]” because they are located in areas that are not considered to be very vulnerable to climatic disasters. These are mostly in Europe, including in France.

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