European NGOs want firms to be required to publicly report on who is investing in land assets so locally communities know who to seek redress from in the event of mismanagement or environmental damage.
NGOs call for tougher rules to block environmentally damaging investments
The EU must urgently develop new financial regulations to stop investors backing projects that result in harmful consequences such as land-grabbing, human rights violations or higher greenhouse gas emissions, according to a group of leading NGOs.
Although the group of charities - which includes ActionAid, Friends of the Earth and Global Witness - yesterday welcomed recent policy proposals the EU is considering to try and unlock a surge in green investment, they warned there is still much more to do to ensure private finance does more good than harm.
"The report from the European Commission's High Level Expert Group (HLEG) on Sustainable Finance is an important step forward for Europe to direct capital flows towards sustainable development," Rachel Owens from Global Witness said in a statement. "However, regulations are urgently required to prevent the financial sector from investing in projects which cause harm, for example contributing to climate change, land grabbing and human rights violations."
Specifically, the charities are calling for more ambition from the Commission on setting mandatory transparency requirements for the financial industry, which would require firms to publicly disclose their exposure to environmental, social and governance (ESG) risks.
They also want to see firms required to publicly report on who is investing in land assets so locally communities know who to seek redress from in the event of mismanagement or environmental damage.
In addition the group is calling for firms to provide information to prove that their supply chains are proactively avoiding ESG risks.
"Although there are some positive proposals in this (HLEG) report, it is significantly less ambitious than we had hoped," Anne van Schaik of Friends of the Earth Europe said. "It is disappointing to see the perpetuation of voluntary instruments in the face of decades of failing investor self-regulation. Strong legislation, including transparent due diligence and accountability mechanisms, is the only way to ensure that Europe's finance and investment industries reconnect to the real economy, to the benefit of citizens, the environment and future generations."
The HLEG report is now being considered by the Commission as it continues work on a new sustainable finance strategy.
