Human rights and green finance: friends or foes?

(EurActiv, 22 Aug 2019) Policymakers currently discussing a ‘taxonomy’ for sustainable finance products at EU level often argue that the proposal already includes social and human rights safeguards. This is not true in the least, warn Eleni Choidas, Lis Cunha and Rachel Owens.

This year has seen significant progress when it comes to creating a more ethical and sustainable European financial sector.

As the Finnish Presidency takes the political reins and the European Commission moves to implement its Sustainable Finance Agenda, the legislative proposals, released in the aftermath of the Action Plan on Financing Sustainable Growth in May 2018, are well on their way to becoming an ambitious set of regulations meant to recalibrate the financial sector towards sustainable investing.

What should this mean, in practice? If rules are designed properly, it should mark the start of stronger consideration of environmental, social and governance factors when an investment is made. That means both planet and people will be increasingly at the forefront of investor risk.

New rules recently agreed will require large investors to disclose and report on their processes to identify and prevent adverse sustainability risks and impacts in the case of both mainstream and sustainable investments after 18 months. They also introduce more detailed requirements to prevent greenwashing in the use of climate-related benchmarks.

In addition, the Commission and European Supervisory Authorities, who regulate the EU’s financial sector, are working on mainstreaming the consideration of sustainability risks across EU financial regulation.

Despite this progress, political discussions on the progression of another crucial file, the Taxonomy, lay bare a key gap in its development – which may threaten its usability and relevance.

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EurActiv, 22 Aug 2019: Human rights and green finance: friends or foes?