Europe needs to toughen-up its regulations for how
investors deal with environmental and social risks, according to Friends of the
Earth Europe and Global Witness.
The two campaign groups have submitted evidence to the European
Commission's "Call for evidence: EU regulatory framework for financial
services", a public call for all interested
parties to provide feedback on the benefits and coherence of the financial
legislation adopted in response to the financial crisis.
The submission concludes that the EU's financial regulatory
system is woefully inadequate in giving guidance to financiers on how to assess
and mitigate environmental and social risks in their investments, and in
applying sanctions when things go wrong. The groups have expressed their
concern that the EU may use the Capital Market Union (CMU) process – of
which this "call for evidence" is a part – to weaken, rather than
strengthen, rules for investors.
Global Witness campaigner Megan MacInnes said:
"We have been calling upon the EU to strengthen
financial rules to ensure investors don't contribute to or incentivise human
rights violations, environmental degradation, or land grabbing in developing
countries. We believe the solution to this problem is better regulation of the
sector, not fewer controls."
Global Witness and Friends of the Earth Europe have both
exposed the harmful involvement of European private investors, asset managers
and other financial services in land grabbing overseas. For example,
Singapore-based Wilmar, the world's largest trader and
producer of palm oil with shares held by European banks and pension funds, has been exposed for causing land grabbing and deforestation in
Nigeria, and failure to prevent forest fires in Indonesia despite the company committing
to "zero deforestation, no peat, no exploitation".
Friends of the Earth campaigner Anne van Schaik stated that the CMU needs to address regulatory loopholes that
allowed reckless lending by EU-based financial institutions to continue. She
"We are very concerned by the Commission's
apparent de-regulation agenda which is manifested in the proposed action and
call for evidence. This gives the dangerous impression that there is too much
regulation in Europe's financial sector, when we know that there are not enough
measures to prevent EU investors from fuelling problems such as illegal
deforestation and land grabbing."
Global Witness and Friends of the Earth Europe are calling
on the European Commission, the Council and the European Parliament to
strengthen environmental and social regulations for European investors and to
ensure that Europe's financial sector lives up to the EU's broader sustainable
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