The European Parliament’s Committee on Economic and Monetary Affairs (ECON) is reaching the final stages of its Report on Sustainable Finance, spearheaded by UK Green MEP Molly Scott Cato as rapporteur. The non-legislative initiative is intended to share the European Parliament’s position as one of the EU’s law-making institutions. It follows the European Commission’s proposed legislative measures in its Action Plan on Financing Sustainable Growth in the EU, released on March 8. The office of Scott Cato told RI that the report can “lend a voice towards” the EC’s Action Plan, although not necessary “mirror” it, and provide some direction in areas where “more thought” is advisable. ECON published a first draft report in February to which MEPs have tabled 315 amendments. The report, as currently stands, calls for a wide range of measures, among others: introduction of carbon stress tests for banks; integration of ESG factors in the investment chain; redesigning fiduciary duty encompassing ESG and stewardship as a legal duty; alignment of the European Investment Bank’s and European Central Bank’s with the Paris Agreement climate goals. According to Scott Cato’s office an initial meeting with ECON shadow rapporteurs (one per each political group of the Parliament) took place this week to discuss some of the amendments. Two more meetings will follow to discuss more difficult issues of the report, before ECON votes on the final text the week commencing April 23, reaching the plenary for a first reading by the end of May.Looking over the amendments it transpires that there are two main approaches from MEPs. One group is demanding further and often mandatory measures, while another is advocating for voluntary and laissez-faire legislation. Paul Tang, shadow rapporteur for the Progressive Alliance of Socialists and Democrats, has called for mandatory carbon stress tests for banks and mandatory disclosure in line with the TCFD’s work within the realm of the EU’s Non-Financial Reporting Directive. Scott Cato has also introduced new proposals, such as ensuring that green bonds do not “breach core social and human rights”, extending the concept of stranded assets to identify other liabilities, and encouraging passive funds to disclose their stewardship activities to “allow proper identification of ESG risks”. It is expected that the issue of the European Central Bank’s (ECB) alignment with the Paris COP21 Agreement and the EU’s ESG goals will be discussed at a meeting of shadow rapporteurs scheduled for today. One proposal for a form of green quantitative easing has been rejected by Esther de Lange, MEP of the Group of the European People’s Party, which has the most seats at the Parliament, and has said in the proposed amendments that “the only mandate of the ECB is price stability”.
According to Scott Catto’s office there has been a very cooperative approach between shadow ECON rapporteurs. So far, a proposal to integrate ESG factors within the fiduciary duty of asset managers has not faced a huge amount of dissent, the office told RI.
Molly Scott Cato will be speaking at the RI Europe 2018 conference on June 5/6 in London.
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