In 2015, France hosted the conference on climate referred to as COP 21. Even before that conference, there was an active interest in the development issues raised by climate change and its impact. Over the last few years, a number of research programs on the theme of Green and sustainable finance have been launched and together they constitute what may be called the French approach to climate change issues.
This approach is based on three specific characteristics of the French environment: a strong financial industry, academic excellence in applied mathematics, and an active interest of public institutions, especially the French Treasury and the Banque de France, in research.
In each of the three branches of the financial industry, banking, insurance and asset management, there are strong French companies with leading international positions, such as BNP PARIBAS bank, AXA insurance group, Amundi asset management. In academia, Mathematics, both theoretical and applied, are excellent and specifically in finance where French Grandes Ecoles have trained generations of analysts and traders in options and derivatives .
This specific environment has allowed the development of what we call three-way partnerial research, associating academics, professionals, and public institutions. This approach is that of the Institut Louis Bachelier, a research network we founded 15 years ago and named after a French mathematician of the early 20th century who was a pioneer in the mathematics of speculation.
Green and sustainable finance covers a wide range of research subjects. A few examples of current research topics :
- Listed corporations are under increasing pressure by investors to give specific information on their ESG (environment, social and governance) policies but in these areas, facts and figures are not as standardized as in financial reporting. Work is needed to collect and harmonize the data on ESG. Asset managers participate actively in this research.
- The alignment of financial portfolios on low carbon trajectories is a major new issue for banks and for asset managers. This is a research subject with practical applications.
- Climate change is by nature a medium and long term phenomenon with great uncertainty on its amplitude but potentially very large. This means that modeling requires new methods when applied to risk assessment in banking and insurance.
- All energy markets are impacted by the policies to reduce greenhouse gas emissions.This new environment has to be analyzed.
In a few years, Green and sustainable finance has become a major research topic for the financial industry and for the academic universe. This is very practical research which we hope will help face a major challenge for the coming years.
More information is available on the web site of the Institut Louis Bachelier, www.institutlouisbachelier.org . The publications are mostly bilingual.
About the Author
André Lévy-Lang (HF 1963 – 65) is the founder and chairman of a research network, the Institut Louis Bachelier, which channels mostly private funds to over 40 research projects in Finance, Economics, Demography, Energy, Climate and Data, in the main French universities and graduate schools. After an early career in engineering he entered the financial world in 1974, retiring in 1999 from the role of CEO for Banque Paribas.