Principles for Responsible Investment
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PRI: EU Commission acknowledges ESG issues as integral to a sustainable financial system
The PRI welcomed yesterday’s announcement by the European Commission High-Level Expert Group on Sustainable Finance—in its Midterm Review of the Capital Markets Union—that it will take steps to ensure a more sustainable financial system. This includes the recognition that those responsible for financial assets take environmental, social and governance (ESG) issues into account.
We are delighted to see the Commission focus on aligning the financial system with sustainable and equitable economies. It is critical that sustainability is integrated into the EU’s financial regulatory and policy frameworks, and that private capital flows are redirected towards sustainable investments.
Amongst other measures, the Commission will clarify that fiduciary duties of asset owners and asset managers include ESG issues, ensure that sustainability is more central to corporate governance and promote better integration of ESG performance in issuer credit ratings and key market benchmarks.
The Commission also commits to working on the integration of sustainability and ESG criteria in rating methodologies and verification systems (such as in green bonds), in supervisory processes as well as investment mandates of institutional investors and asset managers and take sustainability considerations into account in upcoming legislative reviews of financial legislation.
Commitments to improve ESG disclosure, clarify investor duties, better integrate ESG in rating methodologies, and take sustainability considerations into account in upcoming legislative reviews of financial legislation are very welcome and consistent with the approach PRI has been working on. We would also encourage the Commission to consider formal governance to monitor and guide the development of sustainable finance across the EU.
The PRI has long been working toward the goal of a more sustainable system as outlined in the PRI Blueprint. We look forward to seeing further input from the Commission on this issue.