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We propose to integrate sustainability factors into investment mandates – EU’s Dombrovskis

European Commission finance chief’s clarity on sustainability and institutional investment

The European Commission has made the clearest statement yet of its aim to integrate sustainability into institutional investment mandates.

Valdis Dombrovskis, Vice-President for Financial Services, was speaking at the One Planet Summit in Paris today, where he outlined three main areas of focus.

“First, we will propose to integrate sustainability factors into investment mandates. This means these criteria will be reflected in the duties that asset managers and institutional investors have towards those whose money they manage.

“This would clarify their legal obligation to factor sustainability risks into capital allocation decisions.”

The remarks follow the launch of an EU consultation into fiduciary duty and sustainability that was driven by the findings of High-Level Expert Group (HLEG) on sustainable finance.

He tweeted separately: “We will propose to integrate sustainability into the duties that asset managers and institutional investors have towards those whose money they manage. This would clarify their legal obligation to look for long-term, sustainable investments.”

Investment mandates are in many respects the anchors of the investment chain, a fact reflected by a new report this month on long-term mandates by not-for-profit group FCLT Global. Though it is not clear at this stage whether the EU will seek to introduce legislation on the subject.The other targets Dombrovskis mentioned were the creation of a “common language and classification system for what is considered green and sustainable” (taxonomy). The third was green incentives for banks (see separate story).

Dombrovskis said an EU taxonomy for sustainable finance would form the basis for EU standards and labels for Green Bonds and Green Investment Funds, to accelerate green investments by all types of investors.

“The duties that asset managers and institutional investors have towards those whose money they manage.”

On his Facebook page he said: “The EU has and will continue to lead the fight against global climate change. However to achieve our goals and make a full transition to a low-carbon economy, [an] additional €180bn in yearly low-carbon investments will be needed. Public money will not suffice, so private capital will need to be fully mobilized.”

His speech also detailed the EU’s existing sustainability efforts, noting for example that the directive on non-financial disclosure will take effect next year.

Dombrovskis, an economist from Latvia who is also responsible for the EU’s ambitious Capital Markets Union plan, added that the European Commission would hold a High Level conference on March 22 next year to “shape the sustainable and green finance agenda”.