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France adopts SRI regulation

March 2001

The French parliament has adopted new legislation that requires fund managers of employee savings plans to state their position on socially responsible investment (SRI).

The law says fund managers must disclose in an annual report ‘how they take into account social, environmental or ethical considerations either in the screening, retention or divestment procedures for their portfolio of securities, or in the exercise of their shareholders rights such as voting rights’.

A ministerial decree in October will clarify some details of the legislation, particularly one section that says disclosure need only be made ‘in certain circumstances’.

Eric Loiselet, vice president of the newly-formed Forum pour l'Investissement Responsable, said: ‘We are concerned that the law will apply only in certain circumstances, but it could be that the circumstances will just be connected with the size of funds that should be required to disclose. We are looking at the glass as half full rather than half empty – and what is important is that the concept of SRI has been acknowledged by French law.’

Loiselet said the law would lead to a ‘substantial’ increase in SRI in France ‘and therefore help to raise concern about sustainability among company employees and owners of French listed companies’.

He added: ‘It also means that France, like the UK, is one of the European pioneers in the field of SRI and might even influence the emerging debate on the subject within the European Union.’

The new French law is contained in legislation designed to overhaul the employee savings plan system in France. Once the overhaul is complete, the savings plans are collectively expected to generate income flows of $4.3billion (£3bn) each year.

The French SRI clause is similar to the UK’s pensions disclosure regulation, introduced last year, which requires pension funds to outline their position on SRI in their annual statements.

Other European countries are also considering comparable regulations. In Germany a disclosure law is likely to be given final approval by the country’s upper legislative chamber, the Bundesrat, within the next two months – although it will not apply to all types of pension fund. The law will require fund managers to state ‘whether and how they consider ethical, social and legal matters when investing.’




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