Green Industry Act: what impact on employee savings and pensions?

The Green Industry Law enacted in October 2023 in France is a key piece of legislation for companies, introducing new rules with a significant impact on the management of employee savings and group pension schemes. Part of France's efforts to accelerate the transition to a low-carbon economy, the law introduces a series of measures to redirect investment towards the green economy and strengthen national reindustrialization.

What is the Green Industry Act?

First presented in January 2023, the law aims to make France a pioneer in decarbonization in Europe. The aim is twofold: to stimulate the creation of industrial sites while achieving full employment. This ambition calls for far-reaching changes in financing mechanisms, particularly in the areas of life insurance, retirement savings and investments in small and medium-sized enterprises (SMEs) and intermediate-sized companies (ETIs).

Green Industry Act: what impact for employee savings and retirement schemes?

1. Changes to retirement savings plans (PER)

PERs are not to be outdone. The French Green Industry Act now requires these schemes to include a minimum proportion of investments in unlisted assets, in particular securities eligible for the PEA PME-ETI. The aim of this measure is to directly support the financing of French companies, while guaranteeing investment diversification for savers.

A new asset management profile called "Offensive" has also been introduced, increasing the proportion of risky assets and lengthening the investment horizon, thus helping to improve the potential returns of PERs.

Three investment profiles have been defined for these contracts:

• Conservative profile: at least 80% invested in low-risk assets from 5 years before the liquidation date, and up to 6% in unlisted assets if not redeemed before 20 years before retirement.
• Balanced profile: minimum 50% in low-risk assets from 5 years before the liquidation date and up to 8% in unlisted assets if not redeemed before 20 years before retirement.
• Dynamic profile: 30% in low-risk assets from 5 years before the liquidation date and 12% in unlisted assetsif not redeemed before 20 years before retirement.
• Creation of an offensive profile (optional). It will invest a minimum of 30% in low-risk assets from 5 years before the liquidation date, and 50% of the plan's assets from 2 years before the liquidation date. The proportion of unlisted assets may rise to 15%if the plan is not redeemed before 20 years before retirement.

2. New requirements for discretionary management in life insurance contracts

One of the major changes introduced by the Green Industry Act concerns life insurance policies, particularly those with unit-linked guarantees. From now on, companies will have to offer personalized savings strategies based on allocation profiles, which will be determined according to three main criteria: exposure to financial risks, holding horizon and return expectancy. It will be compulsory to offer investments in unlisted or similar assets, thus promoting the financing of SMEs and ETIs.

New obligations for savings managers under the Green Industry Act

Transparency and advisory obligations

One of the pillars of the Green Industry Act is the reinforcement of the duty to advise. Insurers will not only have to offer strategies tailored to policyholders' profiles, but also regularly reassess these strategies to ensure that they remain in line with investment objectives and market trends. This also implies greater information obligations towards employees, both in the pre-contractual phase and throughout the life of the contract.

Listing of units of account with government labels

The units of account (UA) offered in contracts will have to include a percentage of assets benefiting from government labels attesting to their responsible and sustainable nature, such as the "SRI" label (Socially Responsible Investment).

Capping transfer fees

The Green Industry Act also introduces limits on transfer fees from old pension contracts to PERs, to facilitate the mobility of savers between different schemes, while reducing the costs associated with changing providers.

What are the implications for companies?

For HR departments and company directors, these new obligations mean that strategies for managing retirement and employee savings schemes need to be adapted. The Green Industry Act does, however, provide further impetus for companies' CSR policies.

Here are the key points to consider:

• Adaptation of investment profiles: It will be necessary to review the investment options offered to employees in order to comply with the new requirements of the law, particularly as regards investments in unlisted and sustainable assets.
• Introduction of new savings vehicles: Existing savings plans must offer employees one or more investment options geared towards the ecological and socially responsible transition.
• Increased information and advice obligations: HR departments will have to ensure that employees receive transparent and appropriate information on new investment options and changes to their savings.
• Revision of fees and contracts: The new restrictions on transfer fees and the obligation to label investment vehicles mean that existing group insurance contracts and employee savings schemes will have to be revised.

Conclusion

The Green Industry Act marks a major turning point for the management of employee savings and group pensions, by redirecting investments towards sectors essential to the ecological transition. For companies, it is essential to prepare for these changes by adapting their savings schemes to these new obligations, while taking advantage of the opportunities offered by these reforms. HR managers and their teams play a central role in implementing these new measures, and must ensure that their employees are informed and supported in this transition.

Our teams are at your disposal to support you in this new transition.