Foreign Policy: France at a Turning Point?
An exceptional issue of Politique étrangère
Confronted with a world in which the fundamentals are being redefined, France’s foreign policy is under scrutiny. In which geographies should France assert its presence? To which major challenges should France be responding in order to survive in tomorrow’s world? What kind of relationship to that world should France be establishing, as thirty years of Western intervention have ended in catastrophic failure in Afghanistan?
The Energy Price Crises: A Reality Check for Europe’s Green Deal
On its path to carbon neutrality, the European Union (EU) will be exposed to growing energy price volatility and vulnerable to Russian and Chinese pressure on supply and demand.
Philanthropy and Migration in Europe: What Role for Foundations?
The 2015 “crisis” accelerated and/or intensified the involvement of foundations (in particular those from the private sector) in the field of migration. The crisis not only created a sense of urgency, but also generated a movement of public empathy that foundations were willing to accompany and amplify. It was also seen as a challenge to Europe and its humanist values, which foundations sought to defend in accordance with their own beliefs in inclusive societies.
Building European Strategic Autonomy vs. Turkish Strategic Depth: Macron's Diplomatic Gamble
Since coming into office in 2017, Emmanuel Macron has been the loudest advocate for the development of European ‘strategic autonomy’, which aims at reinforcing the European Union’s geo-strategic independence. Asserting the EU’s role on the international stage, starting with its immediate neighborhood, directly clashes with Recep Tayyip Erdogan's long-term expansion strategy in several key areas.
A Strategy for Solving Europe’s Imported Deforestation Problem
The European Union (EU) is the world’s main trader in agricultural products, with imports totaling €142 billion in 2020. These imported agricultural products include commodities – palm oil, beef, cocoa, coffee, soy, etc. – that are responsible for deforestation in producing countries and thus create an “imported deforestation” problem for Europe.
Which way for Germany’s foreign policy after the 2021 elections?
After 16 years of Angela Merkel, Germany’s federal election will not only pave the way for a new government but also for a brand-new foreign policy. At least potentially.
Strategic Calculation: High-Performance Computing and Quantum Computing in Europe’s Quest for Technological Power
Computing power plays a key role in enabling machine learning, for scientific research, and in the military domain. Therefore, the race for computing power has become a key element of the US-China technological competition, and it is also a strategic priority for Europe.
The European Union: Caught Between the United States and China
The United States and the European Union (EU) are now both in agreement regarding China – long viewed benevolently – as a systemic rival in the international order.
The State of Franco-German Relations and European Foreign Policy
The Franco-German relationship is more important than ever in order to deal with international crises and to develop a common European Foreign and Security Policy.
RAMSES 2022. Beyond Covid
For its 40th edition, RAMSES 2022. Beyond Covid, written by Ifri's research team and external experts, offers an in-depth and up-to-date analysis of geopolitics in today’s world.
RAMSES 2021. At the Edge?
RAMSES 2021. At the Edge?, written by Ifri's research team and external experts, offers an in-depth and up-to-date analysis of geopolitics in today’s world.
COVID-19: Down with Globalization, Long Live Europe?
Beyond national healthcare systems, COVID-19 questions major global balances, as well as the modes of cooperation underpinning them.
Bavaria and France. Preparing the Future together
France and Bavaria have a longstanding close and solid partnership. However, the relationship between France and Bavaria is not only marked by a common history and by the structures created over the decades.
The European Equation of Nuclear Deterrence, Variables and Possible Solutions
Ever since nuclear weapons were developed by the United States and the Union of Socialist Soviet Republics, Europe has lived under the nuclear shadow. A major direct confrontation between “the West” and “the East” could have very likely resulted in the detonation of nuclear weapons on the continent. As the Cold War ended, massive reductions in the US and Soviet arsenals (from 70,300 in 1986 to 13,890 in 2019) and a new security architecture radically transformed the European security environment.
Captain in the Storm: Challenges and Opportunities for the German EU Council Presidency
The German Presidency of the Council of the European Union begins on July 1, 2020 at a time of acute crisis. It is facing unprecedented challenges and organizational constraints in a context marked by high expectations from its European partners.
Easing the Lockdown: Some of the Issues
After my first editorial a month ago (it seems like forever!), I am back with some concise remarks.
Covid-19 in Europe-China Relations: A country-level analysis
Analysis from 19 countries reveals the complexities of Europe’s relations with China amid the Covid-19 crisis.
Perspectives on a Hydrogen Strategy for the European Union
There is now a wide understanding that larger use of clean hydrogen in future can be an important mean to achieve decarbonisation of the European economy.
Complementarity or Competition? Franco-British Cooperation and the European Horizon of French Defense Policy
What does future hold for the Franco-British defense partnership after Brexit?
Accelerating the Energy Transition: The Role of Green Finance and its Challenges for Europe
Green finance has been a burgeoning sector since the Paris Agreement and is at the crossroads of financial, socio-economic and environmental challenges. It is hybrid in nature: it uses financial instruments and focuses on environmental issues, while coming under the wider field of so-called “sustainable” finance that assumes a broader approach with the inclusion of socio-economic and governance challenges. It is a catalyst as it facilitates and accelerates the transition to a low-carbon economy. It also includes an increasing range of instruments. From green bonds to green indices, green loans and capital raising activities, the sector is growing both quantitatively and qualitatively. So-called “green” issuance debt alone increased fivefold in nearly three years to reach US $ 257 billion in 2019, emphasizing its on-going innovation and attractiveness.
Green finance embraces the various objectives of public and private actors. It also raises major questions about the future of our societies: choosing to finance only sectors that are already “green” entails significant socio-economic risks, such as job losses in high-emitting (brown) sectors and stranded assets. Adopting a sequenced approach potentially amounts to locking in polluting activities in the long term and not achieving the Paris Climate Agreement’s objectives (lock-in effect).
In view of the physical risks of climate change (devastation and disasters) and those related to energy transition (stranded assets), climate change is now generally considered as a systematic risk. Public and private actors– institutional investors, banks, regulators, central banks, insurers, credit rating agencies, states, multilateral organizations – are taking action both to better understand the risks posed by climate change, and to capitalize on opportunities in this growing field. Green finance provides the financial sector with instruments to effectively reorient capital towards the low-carbon transition. Against a background of uncertainty about the effects of climate change,[1] green finance also reduces the information asymmetry about risks related to major ecosystem disruptions. The structuring and distribution of “green” products are important growth drivers for many stakeholders and in a wide variety of sectors.
However, many risks and challenges remain: financial risks, specifically related to high levels of subsidies for the production and use of fossil fuels, and the lack of a single carbon price; structural risks, which hamper the economic attractiveness of sustainable activities, particularly in terms of profitability; and unclear political signals, notably resulting in regulatory uncertainty. Furthermore, the language of green finance remains fragmented and is still relatively vague: there are many reporting frameworks and taxonomies, preventing easy and uniform ownership by stakeholders. Standardized methodologies, requirements and disclosures are critically needed. A common language is required, not only among Europeans but worldwide, to ensure that financing the ecological transition is genuinely effective.
The quality and comparability of non-financial reporting must be significantly improved to ensure its effectiveness. The principle of double materiality of information – financial and non-financial – is crucial. Green finance provides the entire financial system with instruments to accomplish its transition. It also avoids both a “niche” and a lax approach that are conducive to greenwashing and damaging to the sector growth, and, ultimately, to the transitional objective of green finance. As a source of systemic risk, and in view of the challenges of financing the transition, the aim is to ensure that the concept of sustainable finance remains purposeful by integrating environmental, social and governance (ESG) “filters” into the overall operation of capital markets.
There are many risks of intentional or unintentional greenwashing for market actors: making wrong investment choices, because they are ill-informed about the real nature of sustainability; seeing their reputation discredited in their clients and fund managers’ eyes; undermining trust and the fundamentals of green finance.
The European Union (EU) has taken the lead on these issues. The European Commission’s (EC) Action Plan on Financing Sustainable Growth of March 2018 aims to reorient capital flows towards a more sustainable economy, integrate sustainability into financial institutions’ risk management and promote transparency and long-term awareness within financial institutions. This Action Plan includes numerous instruments, such as an Ecolabel for financial products, the development of a European standard for green bonds, a so-called “Disclosure” regulation legislating on non-financial reporting by market actors, and the clarification of banking and investment advisors’ duties in terms of integrating ESG factors and incorporating sustainability into prudential requirements for banks and insurers. One of the main instruments is the European “taxonomy” for sustainable economic activities, which is intended to establish a common language for greening the financial sector by covering a wide range of actors and activities, at least on a voluntary basis. This future taxonomy has major global potential that could boost the EU’s normative power. Consequently, these challenges are now the focus of the G20 and its Financial Stability Board (FSB), and that of the United Nations.
The EU’s sustainable finance strategy is over the long term, striving to take as comprehensive a view as possible of financial regulation and climate change, and therefore fully redirect capital flows towards financing the transition. The next few months will be critical for the future of the sector, with work continuing on the European taxonomy, the preparation of delegated acts subsequent to the final recommendations prepared by the EU’s Technical Expert Group on Sustainable Finance (TEG), and the implementation of the European Green Deal.
[1]. “Scientific Uncertainty”, Nature Climate Change, Vol. 9, No. 797, October 29, 2019, available at: www.nature.com; M. L. Weitzman, “Fat-Tailed Uncertainty in the Economics of Catastrophic Climate Change”, Review of Environmental Economics and Policy, Vol. 5, No. 2, 2011, pp. 275-292, available at: https://doi.org.
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