Jean-Jacques Pluchart Directive 2022/2464 on the publication of sustainability information by companies based in the European Union  – also known as the CSRD (Corporate Sustainability Reporting Directive ) – sets a new framework for the extra-financial reporting of listed or unlisted companies, large companies, mid-caps and SMEs.  Its implementation is expected to take place over the period 2024-2026. Its transposition into national law was due to take place by 6 July 2024 at the latest, but on 26 September the European Commission had to issue a warning to 17 Member States, including Germany, for delays in transposition.  This reprimand has provoked reactions in several EU countries – notably in Germany – where elected officials have described the regulatory process as “technocratic”, stating that the CSRD is difficult to apply in its current form, particularly by mid-caps and SMEs. Its premature application would risk weighing on the competitiveness of companies in the Old Continent and thus, generate a distortion of competition between European industries and American and Chinese industries in particular. An impact study of the implementation of the CSRD confirmed that its implementation in Germany would entail additional compliance costs estimated at 1.6 billion euros for German companies alone. This estimate has obviously been contested by environmentalists. However, the Commission has recognized the validity of this argument and has proposed limiting the handicap of European companies by reducing their extra-financial reporting requirements by 25%. In her program, presented in November 2024, the President of the Commission reaffirmed the importance of the Paris Agreement (2015) and opened the possibility of a relaxation of the timetable for the transposition and application of the directive. The debate has just been revived after the latest statements by the new American president, affirming his desire to withdraw the United States from the Paris Agreement and to free the American market from certain environmental and social obligations. Indeed, the ISSB (International Sustainability Standards Board) published on June 26, 2023 the IFRS S1 and S2 (Sustainability 1 & 2) standards which are applicable on a voluntary basis to financial years beginning on or after January 1, 2024 by listed companies of all nationalities, while the European Commission adopted, on July 31, 2023, the more stringent ESRS (European Sustainability Reporting Standards), whose compliance in the European Union has been made mandatory by the CSRD. The regulation of the environmental transition therefore remains under debate within the European Union.

Seminar organized by the Association Europe-Finances-Régulations (January 29, 2025) On the eve of the AI summit, the AEFR organized a seminar to answer questions about the “transformative potential” of AI in financial services: how can it change practices in customer relations (KYC), cyber-security and the fight against fraud and money laundering. AI and France’s Competitiveness Philippe Aghion (professor at the Collège de France) wrote a report in 2024 entitled “Our ambition for France”, the conclusions of which are « reasonably optimistic » for our country. Symbolic, numerical and generative AI, as well as LLMs, contribute overall to improving the efficiency of production processes, making companies more competitive, profitable and job-creating. Recent studies show that AI is helping to accelerate innovation and increase patent applications. If is well regulated, AI’s contribution to French growth would be around 1% per year for about ten years, before falling due to system obsolescence and business concentration. However, the impact on employment would be very uneven depending on the sector of activity, the companies, the types of employment and even the workstations. Only 10% of jobs would be completely or partially threatened in Western countries.  The latest mapping of employment risks shows the importance of developing research on production processes and, in particular, on their flexibility. AI and stock market fraud Corentin Masson (chief AI engineer at the AMF) underlines the interest of AI in the investigations conducted by the AMF on the practices of listed companies, particularly in terms of compliance with sustainability, the fight against fraud (insider trading, price manipulation, market abuse, etc.). The objective of the AMF is to secure financial transactions, which implies in particular securing databases (aligned with the European taxonomy). He recommends publishing non-financial reports in HTML format with XDRL tags, in order to facilitate comparisons between companies and sectors of activity, and to set usable standards. AI and the fight against money laundering Fabrice Desprez (CEO of Discal, a subsidiary of KBC group) estimates that money laundering worldwide is worth nearly $4 trillion, with only $2 billion detected and $200 million recovered. At KBC, exposure to money laundering risk is assessed on the basis of 150 criteria. Approximately 10% of customers present risks, which are detected based on the particularity of the transaction and the customer’s score. He considers that the development of cryptos creates an additional risk of money laundering, and that Regulation (EU) 2023/1114 (known as MICA), which establishes uniform rules for crypto-asset issuers, is insufficient. He also regrets the lack of exchanges between banks on this subject. He also denounced the excessive regulation of banking activities. AI and Banking Fraud Mathilde Clauser (director at Revolut) presented the services offered by her bank (50 million customers), whose priority objective is to ensure the security of the operations of its business and retail customers.  She distinguishes between unauthorized fraud and “authorized fraud.” The latter covers in particular the extortion of funds by identity theft (visual and/or sound)  thanks to social networks (in particular META and X). She demonstrated, through use cases, the contributions of AI in detecting these frauds. She estimates that more than 90% of fraud is detected by IA at Revolut. AI and compliance management. AI and compliance Frédéric Boulier (Chief Compliance Officer at Oracle) presents the latest developments in AI for compliance management. He revealed that nearly €250 billion is spent each year by banks to combat financial insecurity and verify the compliance of sustainability reporting. He admits that unsupervised learning by generative AI creates value because it improves KYC and the number of supervisors (or data scientists) responsible for controlling and making better use of the extra-financial reporting of large companies, and soon, of mid-caps and SMEs, as well as correcting the biases observed in the software used to exploit the data of the reports. AI and financial rating Vincent Gusdorf (Managing Director at Moody’s) analyzed the contribution of AI in the financial rating process of listed companies (1). He argues that the latest generation software (such as GPT 4o and Deepseek) has a “reasoning capacity” that helps accelerate their efficiency in detecting information gaps from financial security issuers. Despite these advances, he believes, however, that investment risks are still insufficiently measured by rating agencies. Report written by J-J.Pluchart (1)       read the chapter by J-J. Pluchart, “Towards an ESG rating of credit securities issuers”, in C.de Bossiseu and D Chesneau, Réussir le transition énergétique et écologique, Eds Eska, 2024.

Gold continues to shine as a major asset in an uncertain economic and geopolitical environment. Several factors sustain this trend, both through physical demand and the opportunities offered by gold mining. Here’s why this precious metal remains a central pillar of investment portfolios. Since the beginning of the year, the price of gold has reached historic records, peaking at over $2,685 in September. This impressive surge is primarily driven by the central banks of emerging countries. These institutions have accumulated over 1,000 tons of gold in 2023, an unprecedented volume. Their strategy aims to reduce reliance on the US dollar and diversify reserves in response to currency fluctuations. Moreover, the decline in US interest rates has strengthened the appeal of gold. As the ultimate safe haven asset, gold benefits from arbitrage between the precious metal and other asset classes, particularly bonds, in an environment of low yields. Gold’s status as a safe haven remains undisputed. Commercial tensions and geopolitical conflicts, such as those in Ukraine and the Middle East, have amplified its protective role. During uncertain periods, investors flock to this precious metal, driving its demand and price higher. Forecasts suggest that gold could reach between $2,700 and $3,000 per ounce by 2025. Beyond physical gold, gold mines present significant appreciation opportunities. With record margins and strong results, gold mining companies remain attractively valued. Analysts predict a potential 25% increase in mining stock values, particularly if gold prices continue to rise. Gold also holds strategic value for investors seeking diversification. With low correlation to other asset classes, it acts as a stabilizer for portfolios, reducing overall volatility. By investing in products such as bullion, coins, or specialized funds, investors can effectively diversify their holdings while mitigating risks. In conclusion in a world marked by increasing economic and geopolitical uncertainties, gold asserts itself as an essential safe haven and a strategic lever for investment portfolios. Whether through physical gold or investments in gold mining, the precious metal retains its luster. By 2025, it is expected to further solidify its central role in global financial markets. Column written by Benoit Frayer

The Draghi report proposes to relaunch “securitization” to increase the financing capacity of the European banking sector, arguing that it is lagging behind the US market in terms of fundraising. What is it about? Securitization is the sale by financial intermediaries of a portion of the loan receivables they have granted to investors seeking an investment. On the one hand, these intermediaries regain liquidity and thus renew their financing capacity, and on the other hand, investors, the new owners of these receivables, receive interest and principal repayments. Securitization is usually used by mortgage lenders that do not benefit from deposit accounts and thus find a way to obtain liquidity from specialized investors. This financial technique, encouraged by the authorities to banks, has all the appearance of efficiency and seems to respect the virtuous concern of maintaining their necessary level of equity to finance the economy; it hides, however, serious dangers. Because most securitizations are now “structured”.  -Structured financial products Banks sell some of their receivables to investment funds, usually subsidiaries, to create financial investment products. The arrangement of these products consists of amalgamating receivables from various sources, from more or less defined sectors of activity, and whose solvency risk is variable. This amalgam of different quality receivables increases the profitability of the investment product, by integrating risky receivables which are by definition less well rated and at a higher interest rate. In addition to the arrangement fees they receive in return, banks are encouraged to get rid of their most fragile debts. Thus, CLOs (collateralized loan obligations) appear: amalgamated bonds of more or less vulnerable medium-sized companies; RMBS (residential mortgage-backed securities) amalgamated dependent mortgage loans in Anglo-Saxon countries of the value of the property, CMBS (commercial mortgage-backed securities) amalgamated commercial mortgage loans related to general commercial activity or ABS (asset-backed securities) which fall under consumer credit or automobile leasing. In total, not only are “structured” securitized products dependent on uncertain and volatile sectors of activity, but moreover, their profitability is partly based on risky receivables. Moreover, the distribution of these products to all global investors is favored by the concentration and interdependence of financial markets. Of course, the risk of default and thus the failure of a structured product, widely distributed, will concern all investors and all global markets. -The predictable vicious cycle Investors in these products, beneficiaries of the additional return due to the integration of risky assets will then be led to guarantee themselves by buying at the same time an insurance product called CDS (Credit Default Swap) from financial institutions issuing insurance. All the ingredients that caused the financial crisis of 2007-2009 are thus reunited. If subprimes, objects of dubious manipulations have disappeared from securitized receivables, fragile and uncertain receivables persist and continue to be disseminated in all the structured products we have just mentioned. And whatever the share of these fragile claims at high interest rates in each of these products, it is enough that one or a few of them defaults to contaminate the product itself, because here, by construction, the amalgam of claims prohibits the isolation of the components. Investors holding a structured product whose yield is reduced or is bankrupt, will immediately try to resell it and will then enter a cycle of asset devaluation and all, each in turn, will be forced to do so until the beginning then the loss of their own capital. Given the scale of the exchanges, we will not have to count on any issuer of CDS to absorb a default concerning all these investors: AIG, the main American insurance group and main issuer of CDS during the financial crisis of 2007- 2009 almost died and was saved at the last minute by the United States Federal Reserve which granted it a loan of 80% of its capital. Despite the recent history of the last major global financial crisis, today we see the development, once again, of these dangerous products for the sole purpose of luring investors to the detriment of awareness of the risk they may incur. And even more serious, these products can only harm the proper functioning of the financial markets themselves. The financial crisis could then spread rapidly to the global economy, giving way to a new recession. Added to this is the pressure exerted by the US private banking lobby on the regulatory authorities to call into question or at least reduce the weight of the stress tests. These tests, which measure the adequacy of the capital and liquidity held by banks to cope with crises, have been required since the 2007-2009 financial crisis and are intended to avoid taxpayers having to bail out their banks. The mandate of the new President of the United States, an apostle of deregulation, does not augur well for the future, other than arbitration against the monetary and financial authorities and recourse to blind laisser faire. It is likely that the beginnings of a new financial crisis are in the making, and given the value of the transactions carried out by the world’s financial markets, this crisis would be more serious than the last one. -The myopia of disaster A recent concept used in behavioural microeconomics, that of disaster myopia ( Guttentag / Harrington 1986 ), seems to us to be particularly appropriate to the situation. This concept formalises the behaviour of company directors who measure the occurrence of a risk or economic shock according to the memory they have of it. This memory depends on the length of time elapsed since the last occurrence of this risk or shock. When the probability of occurrence is considered almost zero, because it is too distant in time or even considered to have a random periodicity, then we can speak of disaster myopia. This attitude prevents the understanding and analysis of the warning signs of future difficulties and leads to them being accentuated by aggravating decisions because they forget the lessons learned from previous events. We can say that we are there….but this time, unfortunately, the “disaster

The European Union, in its resolute pursuit of energy transition and industrial sovereignty, is implementing the Net-Zero Industry Act (NZIA), an ambitious initiative adopted in June 2024 as part of the Green Deal Industrial Plan. This legislation aims to strengthen the production of clean technologies in Europe while responding to the U.S. Inflation Reduction Act (IRA). The NZIA sets clear objectives: meeting 40% of Europe’s clean technology needs by 2030 and accounting for 15% of global production by 2040. Key priorities include sectors such as hydrogen, photovoltaic solar energy, and carbon capture technologies. This initiative is part of a broader strategy to enhance industrial competitiveness, accelerate the energy transition, and significantly reduce carbon emissions. To facilitate this transformation, the NZIA introduces a simplified procedure for approving industrial projects related to Net-Zero technologies. Timelines have been drastically reduced: 12 months for projects under 1 GW and 18 months for those exceeding this capacity. A national ambition: the French Solar Pact France is actively investing in the development of its solar energy capacity. Between 2020 and 2024, solar installations grew from 2 GW to 3.3 GW, but the country remains far from its target of 6 GW of annual installations set by the government. To achieve this goal, the French Solar Pact calls for enhanced mobilization of public and private resources. Starting in 2025, ESG (Environmental, Social, Governance) criteria will be introduced into public procurement processes, with an incentive bonus for projects using solar panels manufactured in Europe. A strategic tax credit introduced in March 2024 is expected to generate €23 billion in direct investments and create 40,000 jobs in the French photovoltaic sector. Greening public procurement From 2025, public contracts exceeding €25 million will be subject to strict requirements: no products comprising more than 50% from third countries will be allowed. This measure aims to reduce reliance on foreign imports while stimulating local production. However, Europe’s current limited production capacity may pose challenges. Strengthening the competitiveness of local manufacturers and accelerating the industrial production of solar panels will be critical to avoid supply chain disruptions. Financial challenges While the NZIA encourages private investment and mobilizes existing public funds, financing remains a major hurdle. Current European resources, such as the Horizon Europe program and the Just Transition Mechanism, appear insufficient compared to the massive investments made by the United States through the IRA. Nevertheless, a potential dismantling of the IRA under a future U.S. administration could provide Europe with a window of opportunity to strengthen its capabilities in a redefined international context. Building energy sovereignty European solar industry players are taking action to address these challenges. Their commitments include promoting a solar panel performance index called InduScore, signing long-term contracts to secure supply chains, and deploying at least 30% InduScore-certified panels by 2025. However, China’s dominance in the global photovoltaic market remains a significant obstacle. With industrial capacities far exceeding Europe’s needs, China continues to pose a major challenge to European energy sovereignty. Conclusion: ambitions to fulfill The Net-Zero Industry Act and the French Solar Pact are essential tools for enabling Europe to meet its climate and energy objectives. Yet, several challenges remain: securing sustainable funding, reducing dependence on imports, and accelerating local production. The success of these initiatives will require close coordination between European institutions, national governments, and private stakeholders. In France, the Solar Pact represents a unique opportunity to position the country as a European leader in solar energy. To achieve this, it will take an ambitious vision, a stable regulatory framework, and adequate financial resources. Article written by Benoit Frayer