Last year France introduced a pioneering energy transition law that will guide the country in developing projects for sustainability and efficient energy use. What many people do not know, however, is that this law also directly involves the world of finance. Article 173, in fact, requires anyone managing investments to produce a formal report on their environmental profile. This means – as an article on Greenbiz reports – providing information on the ecological footprint of funds and on their green returns.

The energy transition law in France

The energy transition roadmap, strongly championed by the ministry led by Ségolène Royal, makes France a standard-bearer at the environmental level. The package comprises a long series of initiatives. The one that attracted the most attention is the requirement for apartment buildings to host gardens and photovoltaic panels on their rooftops. But the government has also committed to allocating 93 million euros to offshore wind platforms and wave energy, and to acting as adviser to 200 local authorities wishing to transform themselves into eco-cities. On the mobility front, the French government is betting everything on electric vehicles, with purchase incentives and the creation of a widespread charging network.

Article 173 speaks to investors

Article 173 was strongly championed by Green MP Denis Baupin. In his view, transparency on greenhouse gas emissions and on the environmental performance of investments is the right way to confront investors with the risks linked to climate change. In principle, the measure applies to more than 840 entities, including mutual funds, insurance companies, asset managers and pension funds. The obligation is not binding, but investors will have to publish their reports by the end of 2017 or explain why they have chosen not to do so.

Europe could follow France's lead

This development is already making waves around the world. According to Gordon Morrison of FTSE Russell, a large French pension fund has already knocked on the door of some Boston-based asset managers – who knew little or nothing about it – to ask them what they intend to do to align themselves with Article 173. And this, according to some analysts, is just the tip of the iceberg.

According to Kevin Bourne, Morrison's colleague, "this pioneering French legislation will have widespread ramifications across the sector, because it is a very simple law that carries a great many operational consequences." So much so that senior figures within the European Union, he continues, are also reportedly considering the possibility of adopting a similar rule at Community level.

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