French SRI: European and French CSR Regulations

Part II

European (and French) CSR regulation:
The French have been particularly interested in following the United Nations Principles for Responsible Investment (UNPRI)  Since it was released five years ago, the number of signatories have increased to 800, representing 48 countries managing total assets of $25 trillion.


During the fall of 2001, amidst the aftermath of September 11, the European Commission (“EC”) shed a more peaceful light with its publishing of a green paper, entitled Promoting a European Framework for CSR (“Corporate Social Responsibility”).  The paper’s purpose was to act as a launchpad for CSR debate throughout the member states. 

The EC also published a paper entitled “Implementing the Partnership for Growth and Jobs: Making Europe a pole of excellence on CSR” in March 2006.  The significance of this paper was to unify European member states’ CSR initiatives.  The report also noted that while CSR was not a substitute for public policy, there were several benefits including:

    • more rational use of natural resources (e.g., environmental aspect of ESG)
    • innovation
    • poverty reduction (e.g, social aspect of ESG)
    • and greater respect for human rights (e.g. social aspect of ESG)

Drilling down within the EU, there have now been eight countries that have specific national SRI regulations that cover their pension systems.  The UK wrote regulation in 1999, and enacted them on July 2000.  This regulation called for asset managers to release information on their SRI initiatives.  This regulation was enacted by both the desire to enhance consumer protection and to clarify the legality of SRI-oriented pension investment policies.  (Note, the US still needs to clarify the Prudent Man Rule of ERISA regarding how SRI fits into pension management.)  Note that this regulation deals with pensions and not the actual CSR initiatives of companies.   According to Belsif (Belgium Sustainable and Socially Responsible Investment Forum) both the transparency effect and the enforcement of the above regulation has been “rather weak.”

The French were inspired by the United Kingdom’s pension fund regulation.  In 2001, the French passed a law requiring that employee savings plans specify their rules for ESG.   A similar law closely followed that same year.  This law requires the Retirement Reserve Fund (which supports the French pension system) disclose how its investment policy guidelines take into account ESG.

In May 2001, French firms became required to report on ESG issues, initiatives, etc. in their annual reports.  Required firms are those that are publicly traded or regulated.  Please refer to Belsif’s website and this link for the actual rule.French legislation.

On July 24, 2009 several French signatories agreed to the “Principles for Socially Responsible Investing”PDF file.  This document included several guidelines for Paris financial market participants and continued the work done by Paris Europlace and Forum on Increasing the Contribution of Finance to Sustainable Development, which was co-chaired by French President Nicolas Sarkozy.

The report gave the following recommendations:

  1. facilitate the inclusion of ESG criteria in investors’ decision-making processes
  2. clarify and increase discussions with companies so that they’re encouraged to release qualitative (nonfinancial) information to the public
  3. and develop accounting standards complementary with the above.

As the reader can easily determine, ESG/SRI rules and regulations are fairly “light-weight” and inconsistent within Europe and between Europe and the United States.  This website will keep readers updated with any significant new developments.

Sources:  Belsfi, Novethic, Social Investment Forum, Eurosif, Paris Europlace

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