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Summary
The global ESG finance market has seen a surge in recent years, particularly fueled by the intensifying urgency to address climate change and a significant investor interest in ESG-labeled assets. As of 2020, ESG bonds constituted 10% of total debt issued worldwide, surpassing the trillion-dollar mark for the first time. European and French markets play key roles in this sector, with France's ESG assets totaling €4,820 billion at the end of 2021. Europe has also become the world champion in green bond issues, with nearly half of these issued in euros as of 2020.
The European Union's green recovery plan following the Covid crisis adds further impetus, aiming to channel an estimated €1,175 billion into climate action. Regulations are tightening, with the European Taxonomy and SFDR aiming to drive more standardized and stringent ESG reporting and transparency. On the demand side, 67% of French individuals consider sustainable development when making financial choices, with security and profitability, however, remaining the primary investment concerns.
ESG bond issuance is diverse, with corporates leading the pack in Q3 2021, while development banks have accounted for 68% of the global issuance in 2021. The market also sees a consolidation trend among ESG data and service providers, with large acquisitions such as Sustainalytics by Morningstar.
Navigating the Sustainable Investment Horizon in France: Trends and Dynamics
In France, the ESG finance market showcases a dynamic and growing interest in sustainable investment, driven by a strong understanding of environmental, social, and governance imperatives among consumers and a readiness to align financial choices with sustainability objectives. A substantial portion of French investors, around two-thirds, are conscious of sustainable development and consider them essential when making financial decisions.
This surge in ESG-consciousness is reflected in the fact that more than half of French investors intermittently align their savings and investments according to ESG criteria, underscoring the growing importance of responsible investing. The French ESG market is buoyant, occupying a commanding position in Europe, managing a notable 36% of European ESG funds. This is particularly notable given that France accounts for only 16% of total assets under management across Europe. Moreover, French investment funds with sustainability objectives constitute over half of the landscape, indicating a robust commitment to ESG principles.
Despite the palpable momentum towards ESG investing, traditional investment criteria such as product security and profitability still reign supreme among French investors, with only about 7% prioritizing SRI criteria at the top of their investment decisions. Yet, sustainable investments continue to penetrate mainstream financial products. Since 2020, life insurance contracts in France include at least one SRI fund, and sustainable investments are increasingly commonplace in employee savings plans, pension funds, and even real estate funds.
On the regulatory front, the European Union and France have been proactive in establishing a robust legislative framework to enhance transparency and accountability in ESG reporting. Notably, the European SFDR Regulation, along with France's Article 29 of the Energy-Climate Law, mandates the disclosure of ESG criteria integrations in financial decision-making processes. European regulations are continually evolving, with the European Taxonomy providing a standardized classification of sustainable activities, and tools like the Regulation on EU climate benchmarks, shaping the sustainable investment ecosystem.
The landscape of ESG finance in France is also characterized by the presence of various ESG financial products, with approximately 900 savings products bearing prominent French labels such as SRI, Greenfin, and Finansol. France is poised to play a prominent role in shaping the European sustainable investment narrative, with the European Commission focusing on harmonizing ESG offerings across the continent.
In summary, the French ESG finance market is witness to a strong demand for sustainable investment options, reflective of a broader global trend. Regulations continue to drive transparency and encourage investment in eco-aligned industries.
Key Players Shaping the Global ESG Finance Ecosystem
As the demand for ESG (Environmental, Social, and Governance) financial products and services continues to surge worldwide, a diverse array of companies have solidified their positions as influential market players. Let's explore some of the main companies that have been instrumental in shaping the ESG finance ecosystem.
- Credit Rating Agencies - Standard & Poor's (S&P), Moody's, and Fitch remain pivotal in the integration of ESG factors into credit ratings, offering investors insights into the sustainability and ethical impact of their financial decisions.
- Non-Financial Rating Agency - Vigeo Eiris, a subsidiary of Moody's, specializes in the assessment and research of companies and organizations with respect to their practices and performances on environmental, social, and governance-related issues.
- Index Providers - Bloomberg, Thomson Reuters, and MSCI provide indices that allow investors to track the performance of securities meeting specific ESG criteria. These indices form the backbone for many ESG-focused investment funds and ETFs.
- Climate Risk Specialists - Carbon Delta, a subsidiary of MSCI, is known for its expertise in climate analytics, providing asset managers and investors with risk assessment tools specifically designed to evaluate climate-related risks in their investment portfolios.
- Asset Managers - BlackRock and Amundi are two of the largest asset management firms heavily involved in ESG investing. They offer a broad spectrum of ESG funds and services, allowing investors to incorporate sustainable strategies into their portfolios.
- Large Green Bond Issuers in the Energy Sector - Enel, Iberdrola, and Engie represent the energy sector’s commitment to sustainability through the issuance of large volumes of green, social, and sustainability (GSS) bonds.
These bonds finance projects with positive environmental and social impacts and contribute to the companies' shift towards renewable energy sources. With these pivotal entities, the ESG finance market has a robust structure, backed by a plethora of services ranging from ESG ratings to green bond issuance. These firms not only facilitate ESG-compliant investing but also help drive the global transition towards more sustainable business practices and economic systems. As regulatory frameworks and investor preferences increasingly favor such practices, these players are likely to experience further growth and prominence in the global financial markets.
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- Number of pages : 30 pages
- Format : Digital and PDF versions
- Last update : 19/07/2022
Summary and extracts
1 Market overview
1.1 Definition and presentation
ESG (Environmental, Social and Governance)finance has become increasingly essential over the years, as the IPCC's warnings to massively reduce greenhouse gas emissions to keep global warming below 1.5°C become ever more pressing.
Meanwhile, investor enthusiasm for ESG-labeled assets continues unabated, with the European Securities and Markets Authority (ESMA) producing a report in 2022 highlighting the outperformance of ESG funds, particularly those with the most stringent requirements:
- The value of impact funds grew by 4% over the decade 2010-2020;
- Other ESG strategies saw their asset values increase by 2%;
- Strategies that simply exclude certain sectors grew by 1.7%.
The ESG finance market is governed by a set of standards, proposed by international associations or state institutions. At present, these regulations are not very restrictive, but they are set to become even more so with the gradual implementation of the European Taxonomy, and the impetus it gives to financial players worldwide.
This new trend in the financial markets means new opportunities for a number of players, who will have to deploy a variety of new activities:
- ESG risk management, which is already being taken up by consulting firms;
- ESG reporting, which European companies will gradually have to comply with;
- Green bond issuance, which will become increasingly stringent and a central issue for banks.
1.2 Global market
According to the Global Sustainable Investment Alliance, the sustainable finance market was worth US$** tr illion in ****. According to Deutsche Bank, this market is expected to grow at a CAGR of +**% per year until ****, allowing us to estimate its size at US$*** trillion. These figures correspond to the capital invested in ...
1.3 Domestic market
The French ESG finance market is very dynamic, particularly in recent years. It is the leading market in Europe, with **% of European ESG funds managed in France, whereas France's share of total assets under management is only **%. In addition, over **% of French investment funds have set sustainability objectives. [***]
assessment of the ...
1.4 Weight of France and Europe in ESG bond issues
Over the years, Europe has established itself as the world leader in ESG finance. By ****, almost half of all green bond issues were in euros.
Share of global green bond issuance in euros World, ****, % (***) Source: ****
With regard to ESG bonds in general, we can draw up a table summarizing the cumulative ...
1.5 The European Union's green recovery plan in response to the Covid crisis
In response to Covid-** and the climate crisis, the European Union has drawn up a climate investment plan, directing capital from a wide range of institutions, both public and private. This massive channelling of capital into sustainable investments reassures investors about this asset class, and should drive a broad-based change in ...
2 Demand analysis
2.1 A majority of French people are interested in sustainable development when it comes to their financial choices
**% of French people are aware of sustainable development issues and pay attention to them.
How important are sustainable development issues to you? France, ****, %, %, %, %, %, %, %, %, %, %, %, % Source: ****
To a lesser extent, the French are convinced that savings and finance have a role to play in these issues, with **% of them orienting their savings and ...
2.2 Security and profitability remain French investment priorities
Only *% of French people place SRI criteria at the top of their list of investment priorities. However, **% include them in their top * criteria. The top * criteria remain the security of the financial product (***).
In fact, a CSA survey commissioned by Amf shows that the choice of SRI investment is directly linked ...
2.3 Profile of ESG investment holders
The **-** age group is over-represented among ESG investors: **% of them own ESG investments, compared with **% of the rest of the population. According to a **** KPMG study, this generation is in search of meaning, which explains why **% of this age group would like to develop their knowledge of ESG investing. What's ...
3 Market structure
3.1 Increased credit risk for vulnerable sectors
The consequence of taking ESG data into account in economic forecasts is to redirect capital away from sectors that are less compatible with sustainability requirements, towards more virtuous sectors. The sectors listed below will therefore be the first to bear the brunt of exclusion strategies adopted by investors seeking to develop ...
3.2 ESG bond issuance by type of player
In Q* ****, the quantity of sovereign green bonds issued was double that of the previous year, reaching **% of total green bond issuance. The biggest issuers in Q* **** were corporates, responsible for **% of issues. Indeed, large companies, such as those in the energy sector like Iberdrola or Enel, regularly issue bonds worth ...
3.3 Extra-financial indicators essential for evaluating a company
The following extra-financial indicators are essential for evaluating companies of all sizes: Pillars Themes Essential ESG indicators Environment Climate / Green share Green share of sales in taxonomy Resources / Water Volume of water used or recycled Resources / Energy Total energy consumption Human capital Skills development Total training budget by legal entity Workforce ...
4 Offer analysis
4.1 Types of ESG financial products
Since ****, life insurance contracts have been required to include at least one SRI fund. Sustainable investments are also developing rapidly in employee savings funds, pension funds and real estate funds such as SCPIs. The governance dimension of ESG can also be found in shareholder engagement, which refers to dialogue policies within ...
4.2 ESG data providers: a multitude of offers available
ESG data and service providers have developed from players in different industries.
Source: ****
The sector is also undergoing consolidation. The latest acquisitions are Sustainalytics by Morningstar and RobecSAM by S&P.
We will distinguish six main categories of ESG offerings and services, identified in the Deloitte report on ESG data ...
5 Regulations
5.1 European and French regulations defining the transparency framework for ESG information
European and French legislation has gone to great lengths to establish a transparency framework, notably to identify activities relating to fossil fuels. The European Regulation (***).
the European SFDR has been extended by Article ** of the French Energy-Climate Law.
5.2 A European framework under development: the Taxonomy and the tools to implement it
In addition to the publication of non-financial information, the European regulatory framework is based on two pillars:
The European Taxonomy
Adopted on June **, ****, the regulation is soon to be revised to include gas and nuclear, as transition technologies. This is a common classification of economic activities aimed at achieving environmental objectives, ...
6 Positioning the players
6.1 Segmentation
- Engie
- Blackrock
- S&P
- Moody's
- Fitch Ratings
- Bloomberg
- Amundi
List of charts
- Capital mobilized in the sustainable finance market
- Assessing the role of sustainable finance in France
- Funds under management by ESG label
- Share of global green bond issues in euros
- Outstanding ESG bonds by theme
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Latest news
Engie New Ventures bets on Upstream Tech, a start-up specializing in water management - 16/12/2023
- Creation of ENGIE New Ventures (ENV): 2014
- Total amount invested by ENV: Over 250 million euros
- ENV investment areas from 2020: Biogas, hydrogen, renewable energies and decarbonization
- Upstream Tech creation date: 2016
- Upstream Tech headquarters: Massachusetts, USA
- Number of Upstream Tech employees: Around 30
- Power of ENGIE's hydroelectric fleet worldwide: 18 gigawatts, equivalent to 18 nuclear reactors.
Install 11,000 charging stations in France in two years - 18/06/2023
- Engie Vianeo electric mobility brand
- 12,000 electric charging points planned in France by 2025
- 1,000 charging points already deployed
- 800 fast and ultra-fast charging points on APRR, SANEF, Vinci Autoroutes and ESSO motorway networks (Certas Energy France)
- Presence in 35 Indigo parking lots in 20 cities, Eurométropole de Strasbourg, Communauté d'Agglomération d'Epinal, Métropole Aix-Marseille-Provence, B & B Hotels parking lots and Norauto sites
- 4,500 fast and ultra-fast charging points (less than 20 minutes charging time).
- electricity from renewable sources (hydro, wind and solar)
- French national target of 400,000 charging points by 2030
Financial rating agencies: S&P, Moody's and Fitch - 31/05/2023
- S & P, Moody's and Fitch dominate the market for corporate and government ratings
Amundi posts first-quarter outflows of 11 billion euros - 03/05/2023
- Assets under management at March 31: 1,934 billion euros.
- Assets under management in Asia: 371 billion euros.
- Outflows from joint venture with Agricultural Bank of China: 5 billion euros.
Amundi emerges from 2022 without a scratch - 09/02/2023
- Sales €3.1 billion, net profit €1.2 billion
- 1.904 billion in assets under management
- Passive management 171 billion at December 31
Arkema signs major biomethane purchase agreement with Engie - 20/01/2023
- Purchase of 300 gigawatt-hours of energy per year over 10 years
- This contract, billed as one of the largest private biomethane contracts in Europe to date, is a major step forward for the energy giant
- This low-carbon gas comes from 17 methanization sites, notably on farms, across France, whose production the energy giant buys for resale
- France has 500 biogas plants connected to the gas distribution network
- This sector accounts for 2% of national gas consumption, and is growing fast
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The ESG finance market | France
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