The European Sustainable Investment Forum (Eurosif), has stepped up its campaign to lobby the European Commission (EC) to adopt mandatory requirements for large companies to publish uniform environmental, social and governance (ESG) data and for institutional investors to disclose how they use this information to invest. In a new lobby front, Eurosif said it would also be encouraging the EC to allow long-term investors to maintain their voting rights for shares that have been loaned to third parties via stock lending. Additionally, it said it would ask Brussels to improve transparency along the voting chain by requiring custodians and proxy voting agencies to be accountable for clear reporting of how shares are voted and for providing companies with up-to-date registers of all of their shareholders. In its letter to the Commission ahead of further talks in Brussels at the end of this month, Eurosif laid out the three major points that it aims to persuade the European Commission and European Parliament to take up for the preparation of new regulation.
The first, it said, was an update of the EU Modernisation Directive to oblige large companies –ostensibly those with over 250 employees – to report ESG data using standardised key performance indicators (KPIs), some of which would be sector specific. To date companies are only required to provide such data where they believe it would be relevant to their financial health.
In its second point, Eurosif said it wanted institutional investors to be bound by a statement of investment principles (SIP), which would show how such ESG data is used in the buying and holding of companies. Eurosif said these two points in combination could create a ‘virtuous circle’ where investors reward companies by buying their shares when they see long-term sustainability issues factored into strategy and companies pursue sustainability strategies in order to attract investors, boost their share price and lower their cost of capital. It noted that such mandatory ESG reporting requirements are actively being considered by the Obama administration in the US. Furthermore, Eurosif said investors should be encouraged to have clear share voting policies.
Matt Christensen, executive director of Eurosif, said the two points had already garnered interest from the
EC directorate generals (DGs) of trade and employment and social services ahead of the forthcoming meeting on April 29th. He said the final point on stock lending and shareholder visibility was an attempt to generate discussion within the EC on the key area of voting process and disclosure, which he said was often seen as “unsexy and too complicated”.Eurosif said the EC should make it mandatory for custodians and proxy voting providers to confirm that votes have been executed. It called for Brussels to push for clarity and uniformity on the disclosure of stock lending and borrowing positions on company shares and to examine the effect of stock lending on voting rights.