Investors, Investment Funds and New French Law: The Clouded Crystal Ball – Is There Really More Power to Promote CSR?

Abstract

The objective of this paper is to present and discuss the new French requirements related to socially responsible investment (SRI), and provide reflections on the potential and limits of regulating SRI. We summarize the consequences of new Monetary and Financial Code Article L. 533-22-1 and the related decree, which have created new obligations for fund portfolio managers. This paper is based on a critical study of the new requirement concerning disclosure by asset management companies: Article L. 533-22-1 of the Monetary and Financial Code and its implementing decree, enacted on January 31, 2012. This paper goes back over the debates following the July 12, 2010 adoption of new French Act No. 2010-788. Our method leads us to observe that France has tried to design a new approach to investment funds in order to favour environmental and societal issues. While the French choice is ambitious and consequently must be seen as significant, the new requirements, which blend “hard law” and transparency, unfortunately raise many questions. New Monetary and Financial Code Article L. 533-22-1 expands the non-financial concerns that asset managers have to take into account. The legislation recognizes that financial investment has an impact on society and the environment, and tries to orient that impact to socially productive ends. Nevertheless, the development of French hard law remains isolated, and serious questions have to be asked about its impact: do these French texts make financial asset managers the potential drivers of change in promoting SRI?