EU considers requiring all financial institutions to disclose responsible investment criteria

Sweeping “Responsible Business” proposals from European Commission

The European Commission says it will consider requiring all investors to disclose their responsible investing criteria.
“The Commission intends to consider a requirement on all investment funds and financial institutions to inform all their clients … about any ethical or responsible investment criteria they apply or any standards and codes to which they adhere,” it said in its new Corporate Social Responsibility communication today.
And it invited all European asset managers and asset owners – “especially pension funds” – to sign up to the UN Principles for Responsible Investment.
The Commission, the executive arm of the European Union, put forward a new definition of CSR as it unveiled a series of “Responsible Business” measures. CSR is now defined as “the responsibility of enterprises for their impacts on society”.
The package also included support for social enterprises and an alleviated obligation for listed firms to publish quarterly numbers.
It also features an amendment to various EU accounting directives to oblige large extractive and logging companies to report the payments they make to governments – so-called country-by-country reporting. Reporting would also be carried out on a project basis, where payments have been attributed to specific projects.“We are going further than any other country in the world,” said Internal Markets Commissioner Michel Barnier at a press conference in Brussels. He said it could affect 600 companies.
“You need to have transparency and one needs to have ethical behaviour to reduce the risk, as much as possible, of corruption. We will know what is being paid to which countries and why.”

“While there is little support for these reforms among Europe’s corporate elite, I believe that better transparency is necessary so that countries in the developing world are not exploited by European companies looking to save on tax and pay,” said Sharon Bowles, Chair of the European Parliament’s Economic and Monetary Affairs Committee.

The Commission said the “umbrella” of measures is designed to “place trust and social inclusion at the centre of a more sustainable economic model”.
Companies should have processes to integrate social, environmental, ethical, human rights and consumer concerns – to maximise the “shared value” for shareholders and other stakeholders.
The Commission also revealed it is developing a policy to “encourage” companies to measure and benchmark their environmental performance using a common methodology that could be used for disclosure.