Government resistance over ‘green’ investments

Originally published on ENDS Europe.

Raquel Guerra, 14 Dec 2018

The introduction of binding EU rules on the disclosure of environmental, social and governance (ESG) considerations for financial benchmarks could face resistance from national governments, according to an Austrian Presidency working document.

The ‘green’ financial benchmarks are intended to measure the environmental performance of investments against Paris agreement climate commitments.

The Council text provides that the “administrators of benchmarks that do not promote or take into account the ESG objectives should not be subject to this disclosure obligation”. It adds that “the Commission may review the scope of this requirement and whether it should be extended to cover all benchmarks in the light of future market, technological and regulatory developments”.

The European Parliament’s economic committee, however, favours the binding disclosure of ESG considerations for a wide range of benchmarks, including non-climate and non-ESG benchmarks.

The committee adopted its position on Thursday, adopting UK Socialist lead negotiator Neena Gill’s report by 39 votes in favour and one against.

“All benchmark administrators should be required to disclose how their methodology takes into account the ESG factors”, the EP text reads.

WWF’s European Policy Office welcomed the Parliament’s position, considering it “much more meaningful climate-wise and much more ambitious disclosure-wise”.

The EP committee also approved new climate benchmarks to replace the Commission’s low carbon and positive carbon impact benchmarks: ‘Paris-aligned’ benchmarks, aligned with a ‘decarbonisation trajectory’, and ‘climate transition’ benchmarks, targeting companies that publicly commit to a decarbonisation model.

The Austrian text proposes a non-binding approach here too. “Where administrators of benchmarks do not wish to use the denomination ‘low carbon benchmark’ or ‘positive carbon impact benchmark’ then this Regulation does not apply”, the text reads.

Sebastien Godinot, economist at WWF European Policy Office, said that the Parliament “chose the best possible approach by closely linking the climate benchmarks categories to the Paris Agreement goals”.

The EU Council is expected to approve its position on 19 December, enabling inter-institutional negotiations to begin in January 2019.

Separately, the EP’s economic and budgets committees adopted on Thursday their position on the InvestEU programme, which will replace the European Fund for Strategic Investments that was set up after the financial crisis. InvestEU is intended to mobilise nearly €700bn from 2021 to 2027 in infrastructure, research and innovation and support to SMEs.

However, campaigners criticised the fact that the text fails to prevent further public investments in fossil fuels. “The EU still gives a blank cheque to future fossil fuels subsidies, which means that European public money could still be invested in dirty projects in 2026 or 2027”, said Xavier Sol, director at Counter Balance.

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