DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.com PLC.
Anne van Schaik is a sustainable finance campaigner for Friends of the Earth Europe.
The European Commission published its review of the Capital Markets Union (CMU) today. Hailed as Europe’s response to the financial crisis, the CMU promised safer and more sustainable investment choices for European citizens and small and medium businesses. In its Mid Term Review, there is a notable focus on sustainable economies, and recognition that a deep reengineering of Europe’s financial systems is necessary to prevent investments fuelling land-grabbing, human rights abuses and environmental crimes. But, recognition alone will not solve these problems, nor instigate that deep structural change.
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.