19/10/23

ESG: Investors call on European Commission to outline clear social impact investment rules

As published on: ipe.com, Thursday 19 October, 2023.

Institutional investors, banks and corporates in Europe are calling on the European Commission to design clear rules for social impact investment in housing, healthcare, and education.

The Commission should work towards a Social Investment Framework in light of the green transition of economies and businesses, and an increasing flux of migrants coming to the European Union, the signatories said in a letter.

A Social Investment Framework should be built on rules already in place or in the making, including EU treaties, the upcoming European Corporate Sustainability Due Diligence Directive (CSDDD), and the Corporate Sustainable Reporting Directive (CSRD), they added.

“We have to have a positive definition of social activities in the sustainable finance framework, we don’t have to have a social taxonomy, especially because we see that the environmental taxonomy causes problems, [the social investment framework] can find a place in the [sustainable finance disclosure regulation] SFDR,” said Antje Schneeweiß, managing director of Arbeitskreis kirchlicher investoren (AKI), one of the letter signatories.

The EU sustainable finance package and the Taxonomy fall short of addressing the social aspects of investments, according to the organisation.

With the latest sustainability package, the Commission amended the Taxonomy Climate Delegated Act to add activities contributing to mitigating climate change, including sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, protection and restoration of biodiversity and ecosystems.

But a clear definition of “social investment” is still missing, a gap that hinders social impact investments, the signatories warned. Institutional investors are eager to invest in projects with a social impact, having already integrated social aspects in their investment strategy.

“Investors say to me that we need a social investment framework, but not [through] a very complex regulation, again,” Schneeweiß told IPE.

The list of signatories include (AKI), a group of institutional investors in the German protestant church, Bank for Kirche un Caritas, Evangelische Bank, Triodos Bank, the European Association of Public Banks (EAPB), SGI Europe and CSR Europe.

The organisations have addressed the letter to the president of the European Commission, Ursula von der Leyen, executive vice present Valdis Dombrovskis, Mairead McGuinness, the European commissioner for financial services, and to the commissioner for jobs and social rights Nicolas Schmit.

“I don’t think the European Commission will respond swiftly to the letter, also because there are different views [on the social investment framework] within the Commission,” Schneeweiß said.

The EU might be unwilling to open a second front to designing social impact investment rules, trying instead to simplify the existing Green Taxonomy, as the sustainable finance regulation is seen very critically by companies because it means more effort and added work for them; and the environmental taxonomy demands very detailed information from companies and banks, she added.

Tags

ESG Green Finance Impact Investment