French regulator says firms ignoring climate adaptation in taxonomy reports

The AMF assessed disclosures from 31 listed companies including Engie, Michelin, Maisons Du Monde, Schneider and TotalEnergies.

A study from France’s stock-market regulator has found that companies are ignoring climate adaptation in their EU Taxonomy disclosures.

AMF published its second annual analysis of how French firms are reporting against the EU regulation, which requires them to explain how their business activities contribute to the EU’s objectives on climate mitigation and adaptation. 

Last year’s report came at a time when entities only needed to disclose how many of their activities were eligible for inclusion under the taxonomy. The regulation now requires them to state the proportion of those eligible activities that survive the framework’s technical screens and filters, making them fully ‘taxonomy aligned’. 

The study was based on the latest taxonomy reports of 31 non-financial listed companies, varying in size and sector, with priority given to those in carbon-intensive sectors. 

Air Liquide, EDF, Engie, Michelin, Maisons Du Monde, Schneider and TotalEnergies are among those in the sample.  

Companies were evaluated on the quality of their disclosures, not whether their analysis was credible, the AMF stressed. 

Compliance and results 

Only one of the 31 firms assessed hadn’t published its taxonomy alignment ratios, the regulator said, although it did not name the company. 

The remaining 30 companies had an average turnover alignment of 15.3% (compared with 37.3% that was ‘eligible’ under the taxonomy), it found. This was slightly higher for capital expenditure, which averaged 20% alignment (compared with 47.5% eligibility). 

Operating expenditure was 12.8% aligned (27.6% eligible) with a third of issuers deeming it immaterial, and therefore reporting it as zero. 

“Given in particular (i) the limited sample, (ii) the very different sectors of activity making up this sample, (iii) the varied business models within each of the sectors studied, and (iv) the sometimes different methodological choices or judgements made by the companies, these average values are obviously not representative of the values that would have been obtained for all the French listed companies subject to reporting obligations,” noted the AMF. 

More broadly, the regulator said that “almost all” French companies in scope of the Taxonomy rules have published their alignment with the framework this year. 

“Companies that have not produced their Taxonomy alignment ratios in their non-financial statement published in 2023 - and have therefore been reminded of this by the AMF - represent just under 2% of the population concerned,” it said. This is compared with 5% last year. 

It did not name any of the companies. 

Climate adaptation 

The study notes that, while companies had embraced the requirement to address how activities contribute to Europe’s climate mitigation objectives, climate adaptation “seems to have been excluded from the analysis altogether, or considered immaterial” for most companies in the sample. 

From January, the EU regulation requires companies to start assessing their contribution to four other environmental objectives: waste, water, biodiversity and the circular economy. Entities’ ability to disclose on more than simply decarbonisation will therefore “be a major focus for future publications,” the AMF warned. 

New activities 

In a headline-grabbing move last year, policymakers added gas and nuclear to the list of economic activities that could contribute to EU Taxonomy’s climate objectives. This change contributed to some companies being able to identify more eligible activities under the framework this year.  

“More than a third of the companies in the sample reported having identified new eligible activities in 2023, or less frequently, had reclassified activities as non-eligible that had been identified as eligible the previous year,” the report said. 

But, it added, most were not related to the addition of gas and nuclear, and were instead indicative of a “greater maturity in the work carried out by companies,” including more granular analysis of capital expenditures.  

The AMF said it hoped the latest report would “serve as a useful resource for companies preparing their reporting” as well as for investors and others.