Beginning in 2019 for a period of five years, it has a total budget of €18 million, including €10 million co-financed by the European Commission. ADEME will lead the project in collaboration with the Ministry of the Environment (CGDD), the French financial market authority (AMF), the Frencheur prudential authority (ACPR), 2DII, as well as other private sector partners (GreenFlex, Finance for Tomorrow, and the Institute for Climate Economics (I4CE)).
2° Investing Initiative’s role in the project
2DII will leverage its EC-funded research on enabling meaningful decarbonization plans in the finance sector through climate scenario analysis and target setting, revealing retail clients’ environmental objectives and introducing long-term risk supervision. As the EC High-Level Expert Group (HLEG) member who helped design recommendations on climate disclosures and financial advice, 2DII will also contribute to transforming the French market into a pilot market for these topics.
2DII’s role in the project will span three main axes:
- Our teams will lead capacity-building with national stakeholders and supervisors on topics including climate scenario analysis, stress testing, and climate-related disclosures. The program will notably build on the EC-funded research and stress tests we co-developed with the Bank of England, European Insurance & Occupational Pensions Authority (EIOPA) and other regulators.
- 2DII and ADEME will support French financial institutions in adopting climate targets and decarbonization plans as laid out under Article 173. This program will build on the deployment of 2DII’s Paris Agreement Capital Transition Assessment (PACTA) climate scenario analysis methodology, which has already been used by an array of leading French banks and investors, in addition to more than 1,000 institutions worldwide.
- 2DII and partners will promote the integration of sustainability considerations into financial advice and product information. The program notably involves consumer research on non-financial investment objectives, the design of a ‘template’ suitability questionnaire, the launch of a free online financial advisory tool, and the development of a framework for assessing the accuracy of product manufacturers’ environmental impact claims.
The latter will notably build on 2DII’s pioneering work in studying retail investors’ sustainability preferences. As part of the project, 2DII and the partners will carry out 500+ mystery shopping visits to assess how financial advisors take consumers’ non-financial investment objectives into account. Indeed, according to initial studies we carried out in 2019, the majority of French retail investors want to integrate social and environmental objectives into their investments; however, there is a major gap between their preferences and the ability of banks to offer them compatible products.