A Diligent interview with White & Case partners Diane Lamarche, Saam Golshani, and associate Simon Martin-Gousset.
What trends have emerged from activist campaigns in France over the past year?
Diane Larmarche (DL): In 2023, the number of public activist campaigns in France remained stable. However, the practical resolution of many conflicts occurred privately, often through closed door engagements with directors and executives of companies away from the view of public markets.
Although, in recent years, there has been a decline in judicial activism in France, following Amber Capital's high-profile campaign at Lagardère in 2021, the courtroom remains a tool available to activists targeting French issuers.
Saam Golshani (SG): Over the past year, the most publicized activist campaigns recorded in France were related to ESG topics, in particular governance or climate change issues. For example, care home operator Orpea faced litigation initiated by minority shareholders in 2023, opposing its financial restructuring plan and governance amendments.
Similarly, TotalEnergies received a climate resolution from environmental advocacy group Follow This at its 2023 annual meeting, which urged the company to establish greenhouse gas emission targets aligned with the Paris Agreement. The proposal received 30.4% support.
Simon Martin-Gousset (SMG): The Green Industry Bill (Loi Industrie Verte) amendment, which was withdrawn in October, aimed to introduce new obligations for listed companies, in particular the requirement for boards of directors to develop a climate and sustainability strategy to be submitted to shareholders for an advisory vote every three years, and prepare an annual report on the implementation of this strategy.
There is widespread consensus in the French market that it would be a mistake to enact "say on climate" legislation, given it would add an additional legal burden on French listed companies.
Notwithstanding this, over the past four years, the practice of "say on climate" proposals has gained traction in France, and whilst the number of resolutions has decreased slightly in the past year, proposal approval rates increased significantly. In 2023, the climate strategies of nine French companies (including Covivio, Icade, Schneider Electric, Klépierre and TotalEnergies) were submitted and approved by shareholders. Dissident climate resolutions, such as that proposed by Follow This at TotalEnergies' May 2023 meeting, have also emerged, although they were largely unsuccessful.
Have there been other noteworthy regulatory developments in France, pertaining to investor stewardship?
SG: Shortly after the promulgation of the European Union's Corporate Sustainability Reporting Directive (CSRD), French markets regulator Autorité des marchés financiers (AMF) called on issuers to strengthen shareholder dialogue by presenting their climate strategy at each general meeting and facilitating discussion.
However, AMF also stated it does not have authority to assess the acceptability of draft resolutions which shareholders request to be included on general meeting agendas. Such sensitive topics are highly likely to give rise to litigation before the French courts in the future.
DL: In December 2022, revisions to the AFEP-MEDEF Corporate Governance Code of Listed Corporations were enacted. These revisions aimed to prioritize Corporate Social Responsibility (CSR) strategies, particularly concerning climate issues, although it should be noted that the revisions do not mean the code officially endorses the principle of "say on climate."
These revisions provide that boards, in collaboration with executive management, should establish multi-year strategic objectives in these areas, with a focus on climate. Executive management are required to submit measures to the board implementing this strategy and to inform the board of the results achieved on an annual basis.
On climate-related issues, this strategy is accompanied by precise objectives for different time frames. The board must annually review the results achieved and the relevance, if any, of altering the plan or amending the objectives. The climate strategy and the main actions undertaken to this end must be presented at annual meetings at least once every three years, or where there is a significant change in the strategy. The revisions also emphasise the incorporation of CSR criteria into executive remuneration.
This article was originally published by Diligent.
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