Commission must double efforts towards a sustainable financial system15 June 2017 | 17:12 | Euractive
If the EU wants to contribute to a truly resilient and sustainable financial system, a good first step is an ambitious strategy with a work-plan to put words into action so that our financial system and investments deliver positive results for the people and the planet.
Clarity on the fiduciary duties of asset owners and asset managers is needed, and the inclusion of Environmental, Social and Governance (ESG) considerations into decision-making will ensure that sustainability is central to corporate governance. Sustainability considerations must be the starting point for upcoming reviews of financial legislation.
We need robust and binding criteria for the ESG considerations above, or risk both national legislators and financial investors simply ignoring their investment’s impact, or reverting to greenwashing. Current ESG criteria in financial legislation are consistently side-lined. In the Shareholder Rights Directive the ESG are included, but only on a ‘comply or explain’ basis. This approach leaves huge loopholes.
We can’t rely on investors to do the right thing: self-regulatory measures and policies have failed. Instead we need strong regulation that creates a policy signal and prevents these financiers from providing financial services to companies that continue to engage in land-grabbing, human rights violations, environmental degradation and projects that contribute to climate change. We need a legislative framework that obliges the financial sector to acknowledge ESG harms as risks and base their investment decisions on preventing these risks.
The Commission can start today to ensure that future legislative proposals, like the personal pensions proposal and alternative investment funds, are aligned in terms of environmental, social and governance issues – including having clear and mandatory obligations for these issues. The Commission is right when it says that a deep reengineering of our financial systems is needed – but we’re not going to get there with words alone. It’s time for the European Commission to double its efforts, with full backing from member states, to push for the truly resilient and sustainable financial system that Europe needs.
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