MEPs face a crucial decision. Will they take heed of the global outcry from the climate strikes, or will they water down key financial regulation to tackle environmental and human rights abuses, ask Rachel Owens and Lis Cunha.
Rachel Owens is the head of EU Advocacy for Global Witness. Lis Cunha is EU Policy Officer at ActionAid International. This op-ed is supported by Oxfam, Global Witness, ShareAction, Action Aid and BHRRC.
Over the last few weeks, millions have marched across Europe as part of the youth climate strikes, and this week, MEPs have a chance to vote, in part, for what so many protested for. On Thursday, this European Parliament has its chance to define a framework for “sustainable investment”, during the vote on a Regulation for a framework to facilitate sustainable investment or the so-called Taxonomy Regulation.
This will go one of two ways. Either MEPs will vote for amendments which set out firmer rules on what a sustainable economic activity for investment purposes is, to ensure that those who pump money into projects without doing proper due diligence can no longer get away with greenwashing, environmental destruction and, crucially, human rights abuses.
Or MEPs will vote to water down these legislative proposals on environmental, social and governance risks (or ESG), which policymakers have determined are crucial for determining what a “sustainable” economic activity is – and choose to focus on only the environmental side, disregarding the social and governance risks.
This is reinforced by a call this week by investors with €1.1 trillion of assets under management for due diligence to address environmental, social and governance risks, including human rights risks.
How is this a contradiction in terms? By only focusing on the environmental side of risks, MEPs are effectively allowing damaging investments to continue unhindered if they tick only a single, multi- dimensional box.
Take a small hydro-electric dam – that is marketed as climate-friendly, clean energy project. Certainly, a low “climate investment” risk.
And then take Berta Cáceres, a Honduran Land and Environmental Defender who fought hard to stop her indigenous community’s land being grabbed to build a hydro-electric dam in Río Blanco, Honduras.
She received multiple death threats, attempted kidnappings and threats of sexual assault because of her protest, and in 2016 was shot dead in her home town, less than a year since she was awarded the 2015 Goldman Environmental Prize – a prestigious award recognizing grassroots environmental activists from around the world. This highlights the crucial social investment risk with what seems, on the face of it, to be a “climate friendly” project.
Not just that, but evidence that land protected by indigenous communities tends to thrive environmentally further compounds the injustice of this, and undermines the concept that just attending to the environmental investment risk is enough – ensuring projects and investment respect local communities’ land rights and have robust social and governance safeguards is also crucial.
This is why Thursday’s plenary vote, on the EU taxonomy legislative proposal, is so important. The European Parliament stands at a crossroads as to how it intends to fulfil its commitments to EU citizens to tackle environmental and human rights abuses financed by EU money.
The current approach to the Taxonomy is short-sighted and negates the pressing need to leverage EU money to tackle the key social issues that citizens in Europe and around the world are facing, as well as to ensure there are a minimum set of social standards in place to prevent the financing of human rights abuses, such as land grabs in renewable energy projects.
How MEPs must vote
Therefore, it is crucial that MEPs vote for those amendments tabled in Plenary, which ensure that Social and Governance Risks – as well as Environmental Risks – are properly covered in sustainable activities and investments. Without these properly accounted for, they risk giving a green stamp to investments that are environmentally friendly on the face of it without ensuring they have strong mechanisms in place to avoid land grabs and attacks on indigenous people who provide effective environmental safeguards. The case of the murder of Land and Environmental Defender Berta Cáceres for protesting such a dam is a stark and horrifying illustration of this.
In order for companies to prove that they are truly engaged in socially sustainable activity, the EU must set out firm rules on what criteria they need to follow to achieve this – a so-called social taxonomy. Otherwise, there is zero guarantee that an activity is truly sustainable – it could lead to a situation where certain activities are simply labelled as socially sustainable with no oversight to confirm this.
EU investors’ money should not be allowed to finance any activity that contributes to human rights abuses, whether in Europe or abroad. Any company looking to raise money in the EU should have to prove that they adhere to vital human rights safeguards.
To make sure this legislative proposal is effective, MEPs must urgently improve on the list of social safeguards that companies and investment advisors must take into account as a minimum standard to ensure their activities do not have an adverse impact on people and planet.
The taxonomy must also create a scale to define how environmentally sustainable any economic activity is. This is crucial so investors can easily assess a company’s environmental impact, and so companies have a clear pathway to improving their business models.
Given the growing tide against climate change across Europe, and the upcoming European elections in May, we urge the Parliament to follow civil society’s calls to develop a Taxonomy that is built upon ambitious environmental and social criteria. The eyes of the public will be on the Parliament for this vote and European citizens will be looking to MEPs for a clear sign that policymakers are taking their concerns on climate change and social issues seriously.