Photo: Wolfgang Staudt (CC Attribution Non Commercial)

Researcher Myriam Vander Stichele on developments at the European level

How can investing become truly green? How can we ensure that banks and investors throughout all of Europe share the same responsibility for sustainability? And what is needed to incorporate the aspects of social responsibility into the financial sector? These are a few of the questions that the High-Level Expert Group on Sustainable Finance (HLEG) has tried to address in the last year. The group’s findings were presented today by the European Commission (EC), which had commissioned the HLEG to make recommendations.

Researcher Myriam Vander Stichele took part in the HLEG, together with four other NGO participants, to strengthen the group’s civil society perspective. “SOMO decided to participate because the HLEG is working for binding regulations. These are absolutely necessary. If there are binding rules and regulations, banks and investors cannot be played off against one another and everyone has to follow the same rules.”

The EC wants to use the HLEG’s findings to further develop an action plan for policy and regulations for a sustainable financial sector expected in March 2018 . This will also include changes in the Capital Markets Union an EC plan to mobilise more capital within Europe . “The CMU wants to make investing within the EU easier, including by individuals. One proposal is to give everyone the possibility to invest in an individual private or commercial pension account. But of course, the big question is what guarantees that this will be done in a truly sustainable way?”, asks Vander Stichele.

More and more often, institutional investors such as pension funds and their members want greener investments. “But how can you know whether these green investments will actually be effective? How can you keep a pension fund from financing the only green activity in a company that for the rest is a major polluter, and the end result is not more sustainable at all?”

The HLEG thus proposes to integrate sustainability into all aspects of the financial sector. This also means that all new proposals for financial regulations must be subject to an impact assessment to determine whether that regulation actually promotes sustainability. The EC has already started to implement this concrete proposal. Supervisors also have a clear mandate to examine the sustainable impact of investments.

“As HLEG, we have ‘only’ made recommendations, but at the European level, there is a desire to make the financial sector truly sustainable. Of course, this is also to mitigate risks (unsustainable also means loss-making in the long term) and to create a new competitive market for financial products. But the conclusions and recommendations of the HLEG get to the heart of financial decision-making. Things must change there so that there is a sustainable effect on the economy and in society – starting with good regulations that can combat climate change.”

The HLEG publishes an interim report in July 2017 and asked for feedback from stakeholders, including NGOs. The responses from the NGOs are summarised in the document below.

NGO responses HLEG consultation 2017