Europe backs sustainable finance to boost stability

Written by Rebecca O'Connor on 1st February 2018

An EU plan to stabilise global economies through encouraging more “sustainable” investment was published yesterday.

The UK Sustainable Investment and Finance Association (UKSIF) described the plan as the “most comprehensive EU strategy on sustainable finance ever proposed”.

An expert group pulled together by the EU has drawn up the plan to address the negative effects that climate change, ocean pollution, loss of farmland and poverty have on the economy.

Everyone will benefit: savers, pensioners, companies, consumers and finance.

Recommendations include:

  • Each European country to develop minimum standards for retail funds that call themselves ‘sustainable’. The standard should reflect the country’s distinct priorities and social attitudes, and reflect national financial practises used to address issues such as climate change and human rights. A minimum standard means retail savers and investors will be able to easily identify sustainable funds, building trust and confidence.
  • Regulation should be changed so financial advisers have to ask clients about their values and beliefs. There have been concerns that IFAs have not been explaining to their clients the benefits of sustainable investing alongside traditional approaches. Savers and investors are broadly unaware of sustainable options. Inclusive advice will ensure they have an opportunity to save and invest in line with their principles and environmental and social concerns while also generating attractive returns.
  • The EU should encourage the development of free listings to show how well companies are performing against environmental and social metrics e.g. emissions, wages, equality, fresh water use, etc. This will offer savers and investors a trustworthy, independent assessment of companies and how they behave. People can then tell their advisers which types of companies they are happy, or not happy, to finance through their savings and investments.

Simon Howard, CEO of UKSIF, said: “The UK is a leader in European sustainable finance, and UKSIF members know how to avoid the massive potential losses from unsustainable business models and how to exploit the returns available in new, innovative ones. It’s now time to encourage the whole of the financial sector to contribute to growing a sustainable, opportunity-filled economy.

We hope the UK will do these things – or go further – because it is right and necessary and we have the financial skills to do them. Everyone will benefit: savers, pensioners, companies, consumers and finance.”

Charlie Thomas, Head of Environmental & Sustainable Investment at Jupiter Asset Management said: “This is a comprehensive review which will add to the momentum we have seen in areas such as adviser and consultant support for their clients, while suggesting new steps that – if taken as whole – will contribute to the review’s goal of encouraging capital flows to sustainable investments”

John Ditchfield, partner at Castlefield, an advice and wealth management firm that today launched a sustainability fund, said: “Enquiring about social or environmental concerns must be part of a truly comprehensive Know Your Client process. Much of the industry is starting to recognise and adapt to this and we would welcome further regulatory steps to require this as part of the process.”

Good With Money launched the Good Egg mark, for responsible financial services companies, in May 2017.

It has a free directory of financial services firms that show a commitment to more responsible approaches.

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