EU Committee

Spotlight on ESG

Location: Online Webinar
Access: Everybody
Fee for members: 0
Fee for non-members: 0
On Tuesday the 27th April we were delighted to welcome speakers from the world of public policy and the EU decision making process as well as people who are working at the cutting edge of ESG in the world of finance and business: MEP Sirpa Pietikäinen; Finance Attaché for the French Permanent Representation to the EU, Guillaume Primot; Head of Corporate Social Responsibility and ESG at Natixis Investment Managers, Harald Walkate; and Head of International Policy at Anglo American, Jan Klawitter, for an insightful discussion on environmental, social and governance (ESG) issues, kindly sponsored by FTI Consulting.

Businesses are the main drivers of the economy, but there is still a lack of proper evaluation and assessment of their social and ecological impacts, leaving much to be done to end irresponsible corporate practices. It is clear that the underlying economics need to change. However, there is a debate as to what is needed to drive that underlying economic change.

One way to ensure that companies are committed to taking ESG dimensions into account in their strategies and actions is through reporting, to ensure that the internal control systems in place and adequate, and also as a tool to make the change. However, one of the challenges with this strategy is that you very often solely get the usual suspects participating. If those who report are typically already doing good stuff, it may be hard to bring about change as the companies that most need to make a green transition will not necessarily join the conversation willingly.

This approach must therefore be supported with other measures, and public authorities, including the EU, have an important role to play in creating legislation and an environment in which companies and businesses could conduct their business responsibly. For governments, this can be done through ensuring that carbon tax/price is effective and high enough, through sector-specific policies, and through investing in innovation. Another positive step would be to bring clarity on what's green and what's not green, and to highlight what are environmentally and economically risky investments, for instance, showing that it’s a risk to invest in fossil fuels, and at that point, you get the money moving which leads to a bridge being built between sustainability and the priorities of the finance world.

There are currently many policies surrounding corporate responsibility on the political agenda including:
• International Financial Reporting Standards (IFRS) 2021
• Corporate due diligence and corporate accountability initiative – European Parliament adopted the text on 11 March 2021
• Sustainable Finance package – introduced on 21 April 2021
• Renewed EU Sustainable Finance Strategy – June 2021
• Markets in Financial Instruments Directive and Regulation Revision – Q4 2021
• Solvency II Directive Revision – Q3 2021
• The 26th UN Climate Change Conference in Glasgow on 1-12 November 2021

These measures should create the pathway for a transition for companies. However, there is a question of scope, and while it is great that there has been a tremendous change in the tone and level of discussion in recent years on sustainable finance, many of these rules and approaches have an effect on a global level. Subsequently, once we have designed our EU standards we should not be shy to engage with our partners, and it is important to note that we want to be presenting the debate and leading by example.

Following on from that, three important steps need to be taken for the advancement of ESG:
1. Dialogue between financial players and corporations and the role of data availability
2. Consistent policy frameworks
3. Once the EU agenda is well defined and accepted by all the players, we need to work with our international partners so that we are a relevant part of the international dialogue on sustainable finance

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