We need mandatory due diligence on investments, says EU rapporteur

Prior to the Paris Agreement the political action on climate focused on sapping the energy out of energy-intensive industries. Now the focus is shifting to the money that funds these industries – including money that will eventually pay for our pensions.

To tackle climate change, we must have the power to move our money in the direction of sustainability. This is the fundamental ambition of the new European agenda for sustainable finance.

The EU Commission recently launched an action plan on sustainable finance and organised a high-level conference with French President Emmanuel Macron as guest speaker, who is positioning himself as a global leader on this agenda.

I was delighted to be chosen as the European Parliament’s rapporteur for our own report on sustainable finance, which received overwhelming support from MEPs when voted on in the European Parliament.

Due diligence

My report calls on investors to carry out mandatory due diligence so investors are clear on the impact of their investments on environmental, social and governance (ESG) factors and how they affect human lives around the world.

The commitment shown by the Commission in tackling the vital question of shifting finance away from carbon-intensive sectors is very welcome, although calling the conference ‘Financing Sustainable Growth’ made some assumptions about the dynamic of a sustainable economy that many Green economists would challenge.

So the Paris Agreement has provided a new impetus to decarbonise our economy, as well as an accepted urgency in responding to the threats from climate change. This has led to a flurry of sustainable finance measures across the EU.

Not all sustainable investments are equal

Examples include the French law of disclosure which requires investors to disclose how they factor ESG criteria and carbon-related aspects into their investment policies; German leadership in the field of public investment in the energy transition; the Bank of England’s timely action in encompassing the threat to financial stability from ‘stranded fossil fuel assets’ and Sweden’s ambitious agenda to integrate sustainability into its daily work.

The EU institutions are also bound by the Paris Agreement. This gives MEPs a useful platform from which to criticise some actions which are clearly not sustainable. A glaring example is the decision by the European Investment Bank to lend nearly €2.5bn to finance the Southern Gas Corridor which will lock Europe into gas dependency beyond the 2050 date when we have agreed to phase out fossil fuels.

Indeed, the vast majority of investment and lending is still not compatible with internationally agreed climate objectives or environmental, social and corporate governance criteria. The EU Commission estimates that realising the Sustainable Development Goals will require annual investments in sustainable infrastructure worth €4.7-6.7 trillion.

Beyond climate

We also need to look beyond climate change. While this is the most pressing ecological crisis we face, there are other serious threats to the future of humanity and other life on earth. Examples include the exhaustion of water supplies, the pollution of the water-table, deforestation, loss of habitats, soil degradation and the threat to food supplies.

So far sustainable finance has encompassed only climate risks but this is just the first step and in future will need to include consideration of the wider ecological crises we face.

Despite the positive steps forward, the current pace of development of green finance and clean energy investments is too slow to meet the objectives of the Paris Agreement, not to mention the other ecological crises and inadequate standards of social protection and governance.

The ambition of the Commission on sustainable finance is to be applauded. But the EU must now show global leadership in this area and use the power of money to enable and accelerate the stabilisation of the climate and the protection of the global ecosystem for the sake of current and future generations.

 

Molly Scott-Cato is Green MEP for the South West of England and European Parliament rapporteur on sustainable finance. You can read the report here.

Scott-Cato will speak at this year’s Climate Innovation Summit in Dublin as part of our focus on innovation for sustainable finance. Read more about the event here.  

 

 
Location
Austria
Related Goal
Goal 10: Mainstream climate in financial markets
Articles you may be interested in
In The News
We’re closing for business in solidarity with #ClimateStrike

EIT Climate-KIC will close this Friday 20 September, the...

We’re closing for business in solidarity with #ClimateStrike
In The News
Open Innovation Call targeting air quality and urban heat island effect launch...

The City of Copenhagen’s department Resilient and Sustainable City Solutions within...

Open Innovation Call targeting air quality and urban heat island effect launched
In The News
EIT Climate-KIC cleantech start-up ZOLAR attracts 10 Million Euro Investment

The Berlin-based start-up Zolar raises a 10 million EUR...

EIT Climate-KIC cleantech start-up ZOLAR attracts 10 Million Euro Investment
In The News
Breaking down barriers to climate-finance: the City Finance Lab launches secon...

Competition for the five most innovative financing solutions for...

Breaking down barriers to climate-finance: the City Finance Lab launches second call for proposals
Opinion
Innovating in complexity: Systemic investing
Dominic Hofstetter Transformation Capital, EIT Climate-KIC
Innovating in complexity: Systemic investing
In The News
Climathon onboard ‘Sail to the COP’

On 2 October, 36 young climate change agents will...

Climathon onboard ‘Sail to the COP’
In The News
Research reveals surprising link between socio-economic indicators and sustain...

A new study by EIT Climate-KIC partner academic institutions...

Research reveals surprising link between socio-economic indicators and sustainability transition
Opinion
Transformation capital: A new investment logic for catalysing systems change
Dominic Hofstetter Transformation Capital, EIT Climate-KIC
Transformation capital: A new investment logic for catalysing systems change
Opinion
Innovating in complexity: From single-point solutions to directional systems innovation
Dominic Hofstetter TRANSFORMATION CAPITAL, EIT CLIMATE-KIC
Innovating in complexity: From single-point solutions to directional systems innovation
In The News
Four EIT Climate-KIC innovators nominated for annual EIT Awards

The European Institute of Innovation and Technology (EIT) has released...

Four EIT Climate-KIC innovators nominated for annual EIT Awards
In Detail
Report offers recommendations for development of agricultural impact tool

A new report supported by EIT Climate-KIC’s CSA Booster programme proposes technical, governance and business arrangements for the development of a new tool for...

Report offers recommendations for development of agricultural impact tool
In Detail
Food value chains strategy report offers recommendations based on systemic i...

A new report details the work of EIT Climate-KIC and its partner Metabolic, a consulting company using systems thinking to tackle major sustainability challenges,...

Food value chains strategy report offers recommendations based on systemic impact
In The News
EIT Climate-KIC supports digital roadmap for a circular economy

EIT Climate-KIC, along with several European stakeholders, is advocating...

EIT Climate-KIC supports digital roadmap for a circular economy
In The News
EIT Climate-KIC urges London to lead in turning climate emergency into action

Climate innovation agency EIT Climate-KIC welcomed today the first...

EIT Climate-KIC urges London to lead in turning climate emergency into action
Opinion
London Climate Action Week: Climate Innovation Insights
London Climate Action Week: Climate Innovation Insights
Opinion
How can we deliver a net-zero emissions UK?
Andy Kerr Director, UK & Ireland, EIT Climate-KIC
How can we deliver a net-zero emissions UK?
Opinion
Can we identify the tipping points for transformative climate action?
Susannah Fisher Strategic Research Lead, EIT Climate-KIC
Can we identify the tipping points for transformative climate action?
In The News
Study launched on decarbonising Europe’s heavy industries by 2050

Industry representatives, regional experts, academics and EU officials held...

Study launched on decarbonising Europe’s heavy industries by 2050
In our community
Interview with Yvon Slingenberg of DG Climate Action, European Commission
Interview with Yvon Slingenberg of DG Climate Action, European Commission
In Detail
Evaluating the benefits of improved cooking solutions: impact data in high r...

Gold Standard today released a research study by Vivid Economics that estimates the economic value of Gold Standard-certified project benefits related to climate, health,...

Evaluating the benefits of improved cooking solutions: impact data in high resolution
In The News
New EIT Climate-KIC supported report proposes basis for a future EU taxonomy i...

The European Commission has welcomed the publication of the...

New EIT Climate-KIC supported report proposes basis for a future EU taxonomy in legislation
In The News
WCEF 2019: The challenges and potentials of circular procurement in cities

Increasing population growth and urbanisation intensifies the pressure on...

WCEF 2019: The challenges and potentials of circular procurement in cities
In The News
First round of 15 winners of Reinventing Cities competition announced

C40 Cities and EIT Climate-KIC have announced 15 winners...

First round of 15 winners of Reinventing Cities competition announced
In The News
Lisbon’s City Finance Lab-backed green participatory budget awarded €5 mil...

Lisbon City Council’s first-ever ‘green’ participatory budget, an initiative...

Lisbon’s City Finance Lab-backed green participatory budget awarded €5 million for next cycle
In The News
WCEF 2019: ‘The circular economy in cities’

EIT Climate-KIC CEO Kirsten Dunlop emphasised the importance of...

WCEF 2019: ‘The circular economy in cities’
In Detail
New Report on Circular Procurement in public construction projects shows how...

Public procurement affects a substantial share of world trade, amounting to more than €1.3 trillion per year. In the EU, the public purchase of...

New Report on Circular Procurement in public construction projects shows how targeted action can drive system-level impact
In The News
EIT Climate-KIC at World Circular Economy Forum 2019

EIT Climate-KIC is playing a prominent role at the...

EIT Climate-KIC at World Circular Economy Forum 2019
In The News
17 EIT Climate-KIC solutions included in MI 100 Global High Impact listing

13 EIT Climate-KIC Accelerator start-ups and four EIT Climate-KIC...

17 EIT Climate-KIC solutions included in MI 100 Global High Impact listing
In The News
EIT Climate-KIC’s global cleantech competition ClimateLaunchpad is open ...

EIT Climate-KIC’s ClimateLaunchpad, the world’s largest green business ideas...

EIT Climate-KIC’s global cleantech competition ClimateLaunchpad is open for registration
Opinion
Transformation Capital: A new investment logic for catalysing systems change
Dominic Hofstetter Transformation Capital, EIT Climate-KIC
Transformation Capital: A new investment logic for catalysing systems change