10. Sustainable finance definitions in France

France was the first country to issue a sovereign green bond in 2017. France does not have a sustainable finance taxonomy per se. However, sustainable finance definitions appear in four pieces of legislation: the Green Fin and ISR labels for investment funds, the PACTE legislation and the “Article 173’ of the 2015 Law of Energy Transition and Green Growth (LTECV). The Green Fin label for investment funds is based on the Climate Bonds Initiative taxonomy.

In January 2017, France launched its first sovereign green bond (Green OAT, Obligation Assimilable du Trésor). Since then, subsequent issues were made on the same tranche. The total outstanding amount was EUR 20.5 billion in March 2020, which makes it the largest green sovereign green bond in the world. Four objectives are identified in the Green OAT framework (République Française, 2017[1]): climate change mitigation (55% of the 2018 allocation), adaptation (25%), biodiversity (15%) and pollution (5%).

As per the Green OAT Framework, the French State Treasury Agency (Agence France Trésor) issued yearly allocation and performance reports for 2017 and 2018. Auditing firm KPMG provided a reasonable assurance report on the allocation of proceeds. Second opinion provider Vigeo Eiris confirmed that the proceeds from the Green OAT had been used to fund green initiatives and that France had fulfilled its commitment under the Green OAT framework. An independent Green Bond Evaluation Council defines the guidelines and the frequency of the environmental impact reporting that would be most appropriate for each allocated expenditure. The OECD sits on this Council. In November 2018, the Green OAT Evaluation Council supervised a specific report related to the tax credit for energy transition (Crédit d’Impôt pour la Transition Energétique, CITE) (see below).

France’s Green OAT funds central government budget expenditure, and expenditure under the “Invest for the Future” programme (Programme pour les Investissements d’Avenir, PIA). Proceeds are managed like those of a conventional sovereign bond, with allocations to eligible green expenditure tracked and reported. More than 50% of allocations need to relate to current or future years’ expenditures. Eligible green expenditure projects are identified ex ante by an inter-ministerial working group which reports to the Prime Minister. Projects need to be aligned with the criteria for the Green Fin Label (see below), which itself is based on the Climate Bonds Standard (the taxonomy of the Climate Bonds Initiative (CBI)). Expenditure must relate to one of the following six sectors: buildings, transport, energy (including smart grids), living resources, adaptation, pollution control and eco-efficiency. Nuclear, armament and all expenditure dedicated to fossil fuels are excluded.

The bulk of the € 1.9 billion allocated to buildings was the €1.6 billion in funding allocated to the energy transition tax credit (CITE). The CITE accounted for one-third of the total 2017-2018 allocation.

The CITE is a 30% tax credit that households can claim in the year after carrying out energy performance renovations in their homes. Eligible renovations are capped at 8 000 euros for a single person and 16 000 euros for a couple. Eligible equipment and material must meet minimum technical criteria regarding energy efficiency. The company carrying out the work must be accredited under a domestic label called RGE, “Reconnu Garant de l’Environnement” (Service Public, 2019[2]). Two-thirds of the tax credits that were claimed were associated with insulation work. Seventy five thousand homes were renovated using the CITE during each of the years 2015 and 2016, equivalent to a 16% increase in annual investments in energy performance renovations. The renovations financed with a CITE are expected to reduce the energy consumption and the CO2 emissions of the residential sector by roughly 7% of the 2015 level over the period 2015 to 2050.

The green OAT also served to refinance € 42 million of interest-free green loans. These loans are provided under French law by low-income mortgage intermediary SGFGAS, Société de Gestion des Financement et de la Garantie de l’Accession Sociale à la propriété (SGFGAS, 2019[3]) , which provides up to € 30 000 in zero-interest-rate loans to fund renovation that improves energy efficiency. This company acts as an intermediary between the French State and lending banks.

France is one of the ten countries with the highest number of endangered species (1 235 in total, of which 293 in mainland France)1. At € 772 million, “living resources” was the second largest item in terms of green OAT expenditure in 2018. The bulk of the allocation (€ 385 million) supported research, while € 226 million supported sustainable forest management best practices. Maintenance and extension of protected areas received € 125 million, while € 36 million was allocated to organic farming and biodiversity restoration on farms.

Transport has the highest greenhouse gas emissions of any sector in France (29% of 2016 emissions), mostly due to road transport. Green OAT proceeds focussed on three areas: vehicle energy efficiency and fuel carbon intensity (mostly through research programme CEREMA (CEREMA, 2020[4])), and modal shift, mostly through river equipment (€ 210 million to Voies Navigables de France (VNF, 2020[5])).

Of the € 376 million of 2018 proceeds going to energy, € 184 million went to public research.

Research expenditure, for observation of the Earth in support of climate change adaptation, accounted for € 775 million of proceeds from the green OAT in 2018.

The French Senate has estimated the economic and financial cost of air pollution at between € 70 and 100 billion per year2. Against the backdrop of relevant European directives, France has pledged to achieve the following percentage reductions in emissions by 2030 compared to 2005 levels: SO2 (77%), NOx (69%), non-methane volatile organic compounds (52%), particulate matter (57%), and ammonia (13%). The € 43 million devoted to pollution went to public research and studies.

The OAT framework mentions that both output and impact indicators will be provided, and gives concrete examples. There are no thresholds indicated.

Performance against some 40 output indicators is assessed for categories of allocated expenditures, with levels reached in 2016, 2017 and 2018. A selection of indicators is presented below for the largest 2018 expenditures:

  • Maintenance of French waterways: waterway availability rate (98% in 2018)

  • CITE Energy renovation tax credit: number of households benefitting from the tax credit in thoushands ( 1202 in 2018)

  • Environmental public research: Research produced by the programmes operators in the European Union: 6,2% in 2018

Apart from the Green OAT, four pieces of French legislation include sustainable finance definitions. They are the Green Fin and ISR labels for investment funds, the Loi PACTE (Plan d’Action pour la Croissance et la Transformation de l’Entreprise, or law for the Action Plan for Business Growth and Transformation) and the “Article 173” disclosure regulation (Article 173 of the 2015 Law of Energy Transition and Green Growth (LTECV)).

The Green Fin Label (formerly Energy and Ecological Transition for Climate, TEEC), was legally established in December 2015. It is administered by the Ministry of Ecology and Inclusive Transition, MTES, through three intermediary consulting companies, who act as verifiers of the label: Novethic (a branch of the national development bank Caisse des Dépôts et Consignations), Afnor and Ernst & Young (EY) France. The label gives a “green” tag to investment funds provided their portfolio meets the requirements. In total, 40 investment funds were labelled so far with total assets under management of € 11.5 billion (Label GreenFin, 2019[6]). Eligible funds are private equity funds, bond funds and real estate funds. Funds are eligible to use the label when they meet the following criteria:

  • A certain percentage of their assets under management is invested in “green activities”

  • Their investment respects exclusion criteria (fossil fuels and nuclear-related activities)

  • They actively manage any Environmental, Social and Governance controversy that arises

  • They measure and report their environmental impacts.

”Green activities” are defined with reference to the Climate Bonds Initiative taxonomy. The label defines three types of issuers whose securities (shares or bonds) or debt can be included in an investment fund:

  • Type 1 issuers: 50 to 100% of their turnover comes from a green activity

  • Type 2 issuers: 10 to 50% of their turnover comes from a green activity

  • Type 3 issuers: 0 to 10% of turnover from a green activity.

For each category of investment funds, minimum thresholds between the three types of holdings are set. For instance, to be eligible to use the label, a private equity fund needs to have more than 75% of its assets invested in Type 1 issuers. Bond funds need to hold a minimum of 75% of their assets under management in green bonds that comply with the Green Bond Principles, which were developed by members of the financial industry and whose Executive Committee is co-ordinated by ICMA.

The Investissement Socialement Responsible (ISR) label was created by a 2016 legislation (Association Française de Gestion, 2019[7]). It provides recognition that an asset manager is using Environmental, Social and Governance (ESG) criteria in their investment strategy. The label doesn’t employ a taxonomy, metrics or thresholds. Instead, ESG criteria and management needs to be recognised by an external ESG verifier. The asset manager also needs to demonstrate that the shareholders of the investment funds in which the asset manager invests are actively engaging with investee companies. The label is audited by Afnor and EY France. Forty-five asset managers and 210 investment funds had received the label as of May 2019, for a total of assets under management of € 54 billion.

The PACTE legislation was adopted in May 2019. It amended the French Insurance code (article 1 131-1-2). The legislation makes it mandatory for life insurance product providers to propose to investors at least one investment with the ISR or Green Fin label, or with at least 5 to 10% of its assets invested in securities from issuers belonging to the Social and Inclusive Economy sector (ESS), as defined by the French Labour Code (Code du Travail article L 333 – 2 – 17 -1). The Social and Inclusive Economy Sector (ESS in French) contains a variety of finance institutions, corporates and SMEs organised as cooperatives, mutual companies (« mutuelles »), associations, foundations, when their business and operations are based on principles of solidarity and societal goals (Ministère de l'Economie, 2020[8]).

The one French programme with clearly established definitions is the Green Fin label, which uses Climate Bond Initiative definitions (the Climate Bond Standards).

During the fifth annual Climate Finance Day in Paris on November 29 2019, the French Finance Minister mentioned France supporting the implementation of the EU taxonomy by French financial actors as soon as 2021.


[7] Association Française de Gestion (2019), https://www.afg.asso.fr/solutions-depargne/presentation-isr/label-isr/.

[4] CEREMA (2020), https://www.cerema.fr/fr.

[6] Label GreenFin (2019), https://www.ecologique-solidaire.gouv.fr/label-greenfin..

[8] Ministère de l’Economie (2020), https://www.economie.gouv.fr/cedef/economie-sociale-et-solidaire.

[1] République Française (2017), https://aft.gouv.fr/files/archives/attachments/25562.pdf.

[2] Service Public (2019), https://www.service-public.fr/professionnels-entreprises/vosdroits/F32251.

[3] SGFGAS (2019), https://www2.sgfgas.fr/.

[5] VNF (2020), https://www.vnf.fr/vnf/accueil/qui-sommes-nous-vnf/.


← 1. Oat allocation report 2018, p 38

← 2. Oat allocation report 2018, p 56

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