Europe

EU puts important plans in ESG rulebook on hold amid infighting

EU puts important plans in ESG rulebook on hold amid infighting

ESG

3 minutes

10:10 today

Gender equality and anti-exploitation supply chain laws unlikely to be incorporated into block regulations until late 2020s

Gender equality and anti-exploitation supply chain laws unlikely to be incorporated into block regulations until late 2020s

Fragmentation among EU member states means new legislation on issues such as child labor in supply chains will likely be delayed for years

Photo credit: Shutterstock

The next milestone in Europe’s effort to create a global benchmark for ESG investing has been shelved indefinitely, according to people familiar with the matter.

The so-called social taxonomy was set to be the next board in a multi-year process to create a guidebook for capitalizing on activities that meet environmental, social and governance standards, but it will continue to do so. It is unlikely to see the light of day in a few years. years, people said. It was tentatively scheduled to be discussed before the current committee ends its term in 2024.

Vincent Ingham, director of regulatory policy at the European Funds and Asset Management Association, said social taxonomies “seem to be in the background”. He said the commission “has not taken an official position” but that “it is our understanding that they do not prioritize social taxonomies” and that there will be no movement for several years.

This decision means that goals such as gender equality and supply chains that avoid exploitation will not be included in EU ESG regulation until the late 2020s at the earliest.

This follows the EU’s decision to add gas and nuclear energy to the eco-friendly taxonomy, which has angered some Member States and deeply divided the EU parliament.

Infighting over the process has left the EU with little appetite for the next round of negotiations, which will likely be even more difficult, the sources said.

“Social taxonomies can be highly controversial politically,” said Hugo Gallagher, senior policy adviser at the European Sustainable Investment Forum (Eurosif). “The amount and complexity of technical work this would imply would be mind-boggling, as it would have to cover virtually every sector of the economy.”

Investors were originally promised a European Commission report outlining how to create a social taxonomy by the end of last year. That process was never completed and no guidelines have been put forward by the EU executive branch since then.

The EU Platform on Sustainable Finance, an advisory body to the European Commission, published a set of proposals for a social taxonomy in February, four months behind schedule. This list includes guidelines on wages, gender equality and humane supply his chain. But those recommendations didn’t expedite the process, according to those following the issue.

The EU’s failure to promote the social plank of the taxonomy underpinning EU ESG rules, from corporate to fixed income markets to asset management, comes in an increasingly tense political context.

The war in Ukraine and the energy crisis it exacerbated turned the political debate on energy security, resulting in a revitalization of the coal industry despite soaring greenhouse gas emissions. .

Meanwhile, interest groups are using the lagging process on social classification to try to persuade EU officials to include more asset classes. Most notable is the effort by the defense industry to get it into the sustainable investment rulebook, pointing to the need to arm Ukraine as justification.

For ESG investors trying to navigate the evolving regulatory environment, the EU’s failure to advance a social taxonomy means that their capital allocation is not supported by a codified framework. This is in contrast to a backdrop where both investors and regulators are paying increasing attention to the risks of greenwashing.

The bloc will seek to pursue other policy initiatives to help guide investors, according to EU officials. It said it had already demanded compliance with limited social protection.

©2022 Bloomberg LP


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http://www.luxtimes.lu/en/european-union/eu-to-put-key-plank-of-esg-rulebook-on-hold-amid-infighting-62e638eade135b923672a2ea EU puts important plans in ESG rulebook on hold amid infighting

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