PRI calls for more clarity from new EC measures

Further feedback required on use of investment powers in relation to sustainability impact

The Principles for Responsible Investment (PRI) has welcomed the recent host of sustainable finance measures announced by the European Commission, but has urged the governing body to provide more clarity around sustainability impact.

In April, the European Commission (EC) unveiled the host of measures to enable “investors to re-orient investments towards more sustainable technologies and businesses”. These included the EU Taxonomy Climate Delegated Act, the new Corporate Sustainability Reporting Directive and six amendments to its Delegated Acts.

On the amendments the PRI said: “The PRI supports the action taken by the EC to clarify current fiduciary duty rules for asset managers, insurance undertakings, and other investors and their relation to the assessment of sustainability risks. This clarification, although already accounted for by many investors in their interpretation of fiduciary duties, is a crucial step forward to steer entire capital markets towards improved sustainability practices.”

It supports the amendments that consider sustainability risk as part of risk management, and require conversations about sustainability with clients.

Modern interpretations of fiduciary duty, the PRI said, should include sustainability, thus incorporating ESG issues and performance into investment analysis.

However, it added analysis may not be enough for assessing real-world impacts, and called on the EC to provide further clarity to investors on the use of their investment powers with respect to sustainability impact.

Together with the UN Environment Programme, the PRI is undertaking a legal analysis in order to “determine the extent to which investor duties currently enable investors to incorporate sustainability impact in their investment decision-making”.

The Legal Framework for Impact, published later this year, will make policy recommendations for removing legal impediments to accounting for sustainability impact as a core part of investment.

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Natasha Turner

Natasha is global deputy editor at ESG Clarity, part of the Bonhill Group, and has been a financial journalist for six years. She has been shortlisted for Story of the Year and Investment Journalist of...