France is striving to confirm its position as a global leader in corporate climate disclosures with a new set of binding targets that require investors to declare how green their assets are and set greenhouse emissions goals every five years.

In 2015, when it hosted U.N. climate talks that agreed a major deal to move the world away from fossil fuel, France took the lead in requiring financial institutions and asset managers to disclose their exposure to climate risks.

Since then the debate has moved further into the mainstream and countries and companies around the world are vying for position as environmental champions.

This month, Britain hosted G7 talks that backed mandatory climate disclosure and some policy-makers want a deal to establish global reporting requirements in time for November’s U.N. climate change talks in Glasgow.

France has sought to secure its lead with the world’s first regulations, published on June 2 and taking effect from the 2021 reporting period, to make it mandatory for investors to set greenhouse gas emission goals every five years to 2050 and for quantified targets to protect biodiversity.

The 230 portfolio management firms covered by the regulations will have to declare the percentage of their assets that is green and their exposure to fossil fuel companies.

France was keen to ensure European governments set the ground rules, rather than import U.S.-influenced voluntary recommendations. It says its 2015 rules served as a model for EU regulations on sustainable finance disclosure currently taking effect.

“We don’t want to depend on a framework that comes from the United States,” former state secretary for environmental transition Brune Poirson told Reuters.

BUILDING ON EXPERIENCE

In 2015, France was at the vanguard when it introduced a requirement that institutional investors and asset managers must explain how they factored in climate risks or to give a reason why they could not.

With several years of experience and disclosure regulation entering into force across the European Union, France is seeking to go further than its peers.

AXA Investment Managers, the French insurer’s asset management arm, said that the updated French rules were “more detailed than the European regulation” and should be used as a “user’s guide” to putting the new EU reguirements into practice.

This month’s update also made compulsory the recommendations from the industry-led Task Force on Climate-related Financial Disclosures (TCFD), which a growing number of companies internationally follow on a voluntary basis.

Paris has supported the principles behind the U.S.-influenced TCFD recommendations since they were issued in 2017, but had previously stopped short of bringing them into the French framework.

The shift places it just ahead of Britain, which has proposed UK companies should meet TCFD recommendations from next year.

Central bankers are among those who say mandatory rather than voluntary reporting is necessary to deal with the risk of assets that could prove to be of low value because of their climate exposure.

“Disclosure will help markets to appropriately price climate-related risks and ensure efficient allocation of capital,” Bank of France Governor Francois Villeroy de Galhau told an online central banking conference early this month.

“That is why disclosure should become mandatory, at least as a first step for financial institutions, as it is already in France, and for large corporates,” he said.

RULES VERSUS REALITY

While representatives of French asset managers supported France’s approach, they said that the disclosure rules for investors were ahead of those for companies making up their portfolios.

“The lack of data published by issuers is going to keep us from meeting the regulation’s demands in the short term,” Alix Faure, head of sustainable investing at the French asset managers’ association, said.

Independently of governments and regulators, many investors have been pressing for more climate transparency, which has to an extent eroded France’s first mover advantage.

Campaign group CDP, which tracks corporate disclosure, had 19 French companies on its transparency A-list last year, level with Germany but behind Britain which had 21 firms.

“Everyone is catching up, especially in Germany where big German companies have to be more transparent because investors demand it,” CDP capital markets director Laurent Babikian said.

Whereas once climate rules deterred investors that were seeking the highest returns, investing in sustainable and ethically governed companies is now widely seen as a way to reduce financial risk.

A study by France’s central bank in January found French investors have reduced their exposure to companies in the fossil-fuel sector by 39% since 2015, suggesting that 28 billion euros ($33.34 billion) have been channelled elsewhere.

Green pressure groups, however, question whether French leadership has had much impact so far.

“France has self-proclaimed itself as a leader of green finance since 2017, but four years later the government’s incapacity to spur a shift in financial flows exposes its failure on climate policy,” Friends of the Earth France campaigner Lorette Philippot said in a statement.