Europe must be pro-active on policy - SRI Chronicles #15

News - 12/02/2018

Editorial by Jean-Philippe Desmartin, Head of the Responsible Investment Team, Edmond de Rothschild Asset Management

Europe is at the heart of a number of debates on the environment, especially the highly controversial glyphosate, and responsible investing. The European Commission is expected to make ambitious decisions in coming months.
It will be advised by the High-Level Expert Group (HLEG), which was set up in 2016 by the EU and which is expected to publish its recommendations in the near future. The group released an intermediary report in July 20171.

Several measures in favour of sustainable finance could be unveiled, including the integration of ESG criteria in supervisory authority mandates, the addition of environmental and social criteria to fiduciary duties of investment companies and end investors - this is already the case in France since it features in article 173 of the 2016 Act on Energy and Ecological transition - and reduced capital adequacy requirements for some green investments made by banks.

We should get an overall view on March 22 when the action plan for green finance is presented, an initiative that the European Parliament supports, at least in principle. Euro MPs will also soon be looking endocrine disruptors, an area which could include glyphosate. We would argue for a clearer and more proactive stance from Europe, one that would rebalance the November 17 vote in favour of renewing the authorisation of glyphosate.

Three US researchers have given us the academic point of view. The article, which won the Moskowitz award in 20172, justifies the significance and materiality of including ESG criteria in the variable remuneration of senior executives working for large groups.

We would also like to encourage readers to tread relatively unbeaten paths and see why it is useful to quantify intangible assets and enterprise culture.
All of these factors can create value.

2 The Moskowitz prize rewards academic research into Socially Responsible Investment (SRI). It is awarded each year by the Center for Responsible Business of the Haas School of Business at the University of California, Berkeley.

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