The health crisis has led to a sharp rise in French corporate indebtedness. This is particularly true of small and medium-sized enterprises (SMEs) and intermediate-sized companies (ETIs). The creation of the Relance label complements the emergency measures put in place by the government as part of its economic stimulus plan, and makes an active contribution to supporting and financing the hardest-hit companies by bolstering their equity and quasi-equity capital.
Strengthening the mobilization of household and investor savings
The Covid-19 crisis has worsened the financial situation of French companies. Their gross indebtedness increased by 152 billion euros between March and June, according to a report by the Banque de France. While these players have been able to take advantage of emergency liquidity measures(state-guaranteed loans, short-time working, solidarity funds, deferred charges, etc.) to relieve some of their cash flow, these remain insufficient to guarantee their long-term solvency.
The Relance label identifies investment funds that are committed to mobilizing new resources to strengthen the equity and quasi-equity capital of companies, in particular listed and unlisted SMEs and ETIs. The aim is to redirect the savings of households and professional investors towards investments that meet the needs of companies.
Labeled funds must comply with environmental, social and governance (ESG) specifications.
What are the conditions for obtaining the Relance label?
To qualify for the Relance label, funds must be invested:
- at least 30% in the equity of French companies,
- and at least 10% of the fund must be dedicated to investments in VSEs, SMEs or ETIs headquartered in France.
In addition, compliance with these specifications will be monitored by the French Treasury, and mandatory half-yearly reports will be published.
Finally, to qualify for the Relance label, funds will have to raise capital in 2020, 2021 and 2022 and step up their investments over this period.
Financial sector and investor associations take action
In a press release issued on October 19, the French Ministry of the Economy is counting on the commitment of distributors to encourage members to list label funds, particularly in life insurance policies.
The Association française de gestion financière (AFG) and France Invest have already pledged to encourage their members to approve the label. Similarly, the Fédération Française de l'Assurance (FFA) has called for products bearing the "Relance" label to be referenced in mainstream savings products, so that they can be offered to customers.
The signatories of the Accord de Place for the creation of the Relance label have undertaken to participate in the monitoring and promotion of the label among their members, investors and savers, while respecting their duty to provide advice.