Some of the legislation is still flying below the radar or a lot of companies, according to Luisa Florez, Axa IM head of qualitative environmental, social and governance (ESG) research; such as the energy transition law in France, coming into effect in June 2017, which she calls a “landmark” for responsible investing.
Such laws are positive moves towards improving ESG standards, she says, but investors need further support to understand what the requirements mean in practice.
Florez said: “The law reinforces the role of institutional investors in financing the transition towards a low-carbon economy and encourages more awareness of long-term issues in investment decision-making.”
Double benefit
She points to the law’s twofold boost to responsible investing in France: which requires the annual publication of evidence showing how ESG criteria is being implemented in their investment strategies; and encourages investors to explain how they are moving towards a low-carbon economy each year.
“This is a particularly important issue for smaller institutional investors, who may require more support in the energy transition. Institutional investors need guidance on how best to approach this law and put in place the most appropriate initiatives tailored to the needs and specifics of each business,” she added.
Florez is urging asset managers to take action and help investors through the transition; such as providing alternative indicators to CO2 emissions that identify company contributions, either positive or negative, to the low carbon economy.
The regualtory signals sent by the French government could pave the way for similar developments across other European countries, Florez said.
