Press Release: In peril- EU’s commitment to Paris Agreement on finance

24-06-2021

Civil society and ethical banks worry that the European Commission’s new strategy on ‘sustainable finance’ is set to leave out ambitious measures.

Brussels, 24 June 2021– With the Paris Agreement, the European Union and its member states have committed to “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development” (Article 2.1.c). In parallel, its European Green Deal assigns a key role to private finance in underpinning its green ambitions. Yet, when it comes to concrete political initiatives, the European Commission and the entire European Union back away from ambitious goals.

57 organisations have sent a letter to the Commission today voicing their concerns that the upcoming new version of the strategy on sustainable finance will not include the tools necessary to divert investments from the harmful to the sustainable. It comes on the back of a lengthy discussion on the Taxonomy for sustainable activities (or Green taxonomy) which is in peril of becoming watered down severely.

The campaigners argue there is a strong need for a sign that the EU will still aim at effective measures to divert financial flows, in particular in four ways explained in the letter. First, the EU needs to clearly exclude “carbon-intensive assets such as gas or highly risky energy such as nuclear” from the Green taxonomy. The remaining three points concern initiatives that need to be included in the new strategy. For the EU to be able to divert flows away from harmful investments, a new taxonomy is needed to define what may be considered as polluting activities. This, in turn, can serve as a basis for regulatory initiatives in areas such as banking regulation. Finally, there need to be minimum standards on investment products called ‘sustainable’, if the strategy is to steer clear of becoming a greenwash exercise.

Shonan Kothari, convener of the Change Finance coalition, said:

“We are deeply concerned to hear that the Commission will not aim for ambitious changes in the Renewed Sustainable Finance Strategy. A drastic shift is needed in the area of finance if the EU is to be able to honestly say it is working on the basis of the Paris Agreement. The ground covered so far in the European Union doesn’t match the rhetoric. If we do not see strong new plans in the new strategy to actively dissuade harmful investments, the coming years will be a steep uphill battle.”

Lara Cuvelier from Reclaim Finance, a member of the Change Finance coalition said:

“There is a real risk that what was supposed to change the way financial markets operate may end up as an illusory success – a greenwashing exercise, ironically. If the European Commission is not willing to put minimum standards and strict criteria on the table, for instance on where investments flow, that’s where we are likely to end up.”

The Change Finance coalition, the initiators of the letter, have complained earlier that the European Commission is listening too much to the financial industry in this area. On banking, for instance, the EC picked BlackRock as a consultant on banking regulation. The coalition now fears that the giant asset management fund has been allowed to set the tone on banking.

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For further information or interview requests, please contact:

Shonan Kothari, Convener, Change Finance

shonan@changefinance.org / +32 2 880 0440 / +32 489 25 08 11

NOTES TO EDITORS

Change Finance is a network of civil society organisations and activists that campaign for reforms of the financial sector.

It has been strongly involved in defending the independence of EU financial regulators from the influence of the financial industry. As a result of its 2019 EP election campaign, 78 MEPs have signed Change Finance’s pledge to stand up to the financial lobby.

In 2020, Change Finance mobilised around crucial cases of conflict of interests: the Adam Farkas revolving door case, the attempted nomination of Gerry Cross as the director of the European Banking Authority (EBA), and the BlackRock case, where the Commission hired the notorious asset manager BlackRock as a key adviser for the creation of new banking regulation. It also mobilises EU institutions to step up their work on sustainable finance.

Open letter: A strong EU renewed sustainable finance strategy