Press release / May 24, 2018

Commission’s new proposals fail to halt harm done by the financial sector

Global Witness has issued an urgent call for stronger safeguards to stop investments and financial deals causing human rights abuses, land grabbing and damage to the environment.

As the European Commission launched its latest legislative proposals for Sustainable Finance, the anti-corruption and human rights NGO expressed fears that they do not meet the EU’s sustainable development, human rights or Paris agreement ambitions. They also weaken the ambition set in the Commission’s Action Plan - and unless reinforced, will fail to address these harms.

Rachel Owens, Head of EU Advocacy for Global Witness said:

"Today’s proposals have failed to go far enough - it is time for robust regulations to curb the excesses of financial deregulation which have driven global deforestation, land grabbing and human rights abuses.

"Reforming the duties of European investors is crucial stop companies causing harm but the Commission should have gone further and introduced mandatory due diligence which would provide the means for the financial sector to know, mitigate and communicate how their investments work for society – not against it.

"In giving priority only to addressing climate change, the Commission’s proposals are ignoring the broader environmental, social and governance elements of “sustainability” - and may fail to deliver on crucial global sustainability commitments such as the Sustainable Development Goals, the Paris Agreement and UN human rights principles. EU citizens have the right to be sure that their pensions and savings aren’t linked to attacks and murders from land grabs and deforestation.”

Global Witness has investigated and exposed several cases which lay bare how EU investors were backing land grabs with devastating consequences for people and planet including through their Rubber Barons Report and The New Snake Oil? Report.

The European Commission is neglecting its commitments to the “Social” in  “Environmental, Social and Governance (ESG) criteria” – including human rights, workers rights and community land rights. Because of this it is unlikely to deliver on its commitments to the UN’s Agenda 2030 including the UN Sustainable Development Goals.

The anti-corruption and human rights NGO stresses that the ESG criteria must be applied to the entire financial eco-system – not just to the 1%[1] of “green” investors. Applying mandatory due diligence would oblige all investors to integrate ESG-risk assessment, mitigation and disclosure requirements to prevent EU finance leading to social harms.

Global Witness has a number of concerns with the Commission’s proposals, as launched today:

  • The Commission’s long-term agenda lacks hard commitments to move beyond a narrow focus on climate change to broader environment concerns, social and governance issues: despite the Commission's stated ambition to deliver a long-term strategy on a broad concept of sustainable finance, today’s proposals ignore the European Parliament's support for such a wide interpretation of "sustainable" as voted by the Economic and Monetary Affairs committee in April. Environmental standards are closely dependent on social and government standards and must be considered in a coordinated way.
  • The sustainable finance taxonomy risks only promoting products which are already “green”, without capturing the human rights impacts: The Commission’s proposals for a sustainable finance taxonomy will only be able to identify "green" investments and will ignore the urgent need for broad standards for ESG risk management to ensure the sector “does no harm” and fulfils its duty of care[2]. This is why Global Witness will closely monitor and engage with the work of the Taxonomy Expert Group. The Taxonomy Regulation proposed today fails to properly look into interactions between environmental and other ESG issues, and foresees that a social taxonomy might only be implemented by the end of 2026. This is too late.
  • The importance of mandatory due diligence: This is essential to ensure investors are identifying and mitigating against risks to people and the environment and not driving corruption and other governance black holes. The Commission’s proposals may produce some marginal green transition benefits – but it won’t stop the negative social and human rights impacts of investments. Again the proposals ignore the European Parliament's support for mandatory due diligence as voted by the Economic and Monetary Affairs committee in April.
  • The investor duties proposals fail to ensure all of the investment eco-system is reformed - to really ensure there is shift away from unsustainable investments, not only ‘green’ investments have to disclose their sustainability impact but all investments.

[1]  http://www.eurosif.org/wp-content/uploads/2016/11/SRI-study-2016-HR.pdf

[2] See here for French duty of care law on companies: https://www.legifrance.gouv.fr/eli/loi/2017/3/27/2017-399/jo/texte

/ ENDS

Contacts

Heather Iqbal, Senior Communications Advisor

[email protected]

+44 (0) 20 7492 5890

Rachel Owens, Head of EU Advocacy / Directrice du Plaidoyer (UE)

[email protected]

+32 (0) 487805069

+44 (0) 7939460357

Notes to editor:

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