(News Bulletin 247) – The Autorité des marchés financiers is working on a definition to assess a company in the process of “green” transition, on the basis of the reports that it must publish each year.

How to define a company in the process of environmental transition? The answer does not currently exist in European regulations, but the French Financial Markets Authority (AMF) is working to change the legal framework.

In its broad “Green Pact”, the European Commission has taken an interest in green finance and the creation of rules to frame it. But its definition of “sustainable investment” is currently too vague for players in the sector and its “green taxonomy”, which classifies sectors of economic activity according to their impact on the climate and the objective of mitigation and adaptation to climate change has its limits.

For Jérôme Reboul, director of international regulations at the AMF, a “binary” conception – green or not green – of sustainable finance can prevent certain companies, considered “brown” due to a heavy climate impact, from obtaining financing. While precisely “many transition projects are in the hands” of companies “very brunettes“, he justifies.

In the United Kingdom, the stock market policeman has decided to create five categories of funds with different degrees of requirement, including a classification “in transition”, one “aligned” with the taxonomy (which therefore includes a large share of sustainable activities) and an “impact” one, which aims to generate a positive social or environmental impact.

“A transition plan”

In its reflections on the notion of transition, the AMF plans to assess the transition of a company based on the reports that it must publish each year, explains Jérôme Reboul, while by 2026 the directive European Union on the publication of information on sustainability (CSRD) “will require” companies “to establish and communicate a transition plan”.

Relying on these self-published reports by the companies is an easy solution to implement since the legal framework is already provided for, with one caveat, however: it is a “business logic”, which may not be the height of the objective “to accomplish a transition on the scale of the entire economy”, warns Jérôme Reboul.

He cites the example of an energy producer who “could quite well present a flawless transition plan by selling its coal-fired power plants… But economy-wide, you have to close the coal-fired power plants , and not just sell them!”

A classification into three categories

Ideally, the AMF would like to take a more macroeconomic view and classify economic activities into three categories: those that are already sustainable, those that contribute to an orderly transition plan, and those that need to be stopped.

Such a typology would complete the existing European taxonomy, according to Jérôme Reboul, but designing it represents “a titanic task even more complicated than that of the taxonomy” on which the European Commission has worked for several years.

In addition, “the question arises as to what is the optimal transition”, with for example a debate on the place of natural gas in the energy transition, recalls Jérôme Reboul.

(With AFP)