PRI issues five recommendations for EU covid-19 recovery plan

PRI, IIGCC and not-for-profit charity CDP write open letter to EU leaders encouraging an acceleration to net zero emissions economy

The Institutional Investors Group on Climate Change (IIGCC), Principles for Responsible Investment (PRI) and not-for-profit charity CDP have written an open letter to EU leaders with five recommendations they believe will support a sustainable economic recovery from the covid-19 pandemic

The organisations said they are encouraging European leaders to build an accerelerated transition to a net zero emissions economy, in line with the EU’s Green Deal and Paris Agreement, into any recovery plans.

Specifically, the group outlined five key factors that should be addressed and said it should be legislated to ensure that “at least 25% of climate-mainstreaming ambition is maintained as part of the Multiannual Financial Framework for 2021-2027 (MFF), for the whole seven-year period”.

The open letter, signed by the groups and their 100+ signatories, said: “The deadly outbreak of the covid-19 pandemic has disrupted our lives and livelihoods, communities and economies. We recognise the EU and its Member States’ immediate priorities must be intervening to save human lives and providing economic and financial relief to support the most vulnerable, stem the health crisis and curb economic disruption. At the same time, these efforts should not lock in high carbon pathways.

“The European Union is now beginning to consider economic recovery measures to address the acute shock and impacts of the covid-19 pandemic. With trillions of euros in capital under their management, we as investors are willing to help accelerate the recovery as it will require the efficient and equitable deployment of both public and private capital in fiscally-challenging times.”

At the end of May, the European Commission (EC) unveiled a coronavirus recovery plan, which included €750bn to sharpen the region’s focus on moving to a sustainable economy.

It presented a revamped long-term EU budget and a €1.85trn recovery plan including the proposal to create a new recovery instrument, Next Generation EU (€750bn), and has also unveiled its adjusted Work Programme for 2020.

The IGCC, PRI and CDP letter to EU leaders request the plan should go even further and also highlights the risks of not adopting an even more sustainable path.

“Beyond the immediate need of relaunching the economy, ultimately recovery plans in Europe should also include sustainability and equity, and accelerate the transition to a net zero emissions economy to mitigate climate risk, create new jobs and catalyse the sustainable deployment of private capital,” it said.

“Recovery plans that overly exacerbate climate change would expose investors and national economies to escalating financial, health and social risks in the coming years. Net zero transition plans need to underpin the recovery of countries, regions and companies.”

The five recommendations for an investible and sustainable economic recovery from the covid-19 are summarised as follows:

1. Prioritise human relief and job creation without locking in high carbon pathways. Recovery plans should create jobs across society that match with investments in net zero emissions energy, industrial, building and transportation systems, climate resilience measures and other sustainable infrastructure.

2. Support the Green Deal and uphold the Paris Agreement. Governments, investors and companies must support the Green Deal and its objective of making Europe climate-neutral by 2050, and strengthen their commitments in line with the Paris Agreement, which remains the best multilateral instrument to accelerate emissions reductions and reduce the human health and economic risks from climate change. In order to do this, European leaders should uphold the 25% climate-mainstreaming target of the MFF, rapidly legally enshrine Europe’s 2050 climate ambition with the European Climate Law.

3. Member States should ensure covid-19 support addresses climate risk. Carbon-intensive companies that receive government bailouts, grants, loans, tax concessions and temporary equity purchases should be required to establish and enact climate change transition plans. Investors should work closely with national policymakers on the implementation of these transition plans.

4. Prioritise climate resiliency and net zero emissions economic solutions. The EU and its Member States can accelerate the recovery by facilitating fresh investment and jobs in clean energy, which can often also be deployed cheaper and faster than incumbent carbon-intensive activities. Support for new sustainable infrastructure such as electrified transport systems, green industrial production and resilient community assets could also drive long-term clean jobs and growth.

5. Embed investor participation in recovery planning. Many Member States will be more fiscally challenged after deploying immediate pandemic relief, and unlocking private capital will therefore be critical to recovery. As investors, we would welcome assisting the EU and its Member States in designing efficient, equitable and sustainable recovery plans. 

The letter concluded: “The path we choose in the coming months will have significant ramifications for our global economy and generations to come. It is critical that Europe works with investors, companies and workers to develop just and sustainable recovery plans. As leading investors, we stand ready to help policymakers to invest in a better, more resilient future.

“We stand ready to work with government leaders in implementing these actions.”

Commenting on the action taken to lobby the EU, Eoin Fahy, head of responsible investing at KBI Global Investors, said: “It’s very clear from our interactions with clients that investors are not reducing their focus on ESG issues, as some analysts expected in the early stages of the covid-19 crisis.  These issues are even more important now, as the crisis has shown how exposed investors are to non-traditional risks. 

“As the EU and its Member States begin to focus on the economic recovery that is now underway, there is an opportunity to create a green and sustainable future.  This is of course an important social and environmental goal, but it’s important to long-term investors from a financial return point of view too as the costs of inaction on climate change are immense, dwarfing even the cost of the covid-19 crisis.

“That’s why it’s so important investors make their views known to EU and national leaders.  Taking action now on climate change issues is in the best interests of investors as well as the planet – and as government leaders consider what a post covid-19 world should look like, it’s imperative that the voice of investors is heard.”


Natalie Kenway

Natalie is editor in chief at MA Financial covering ESG Clarity, Portfolio Adviser and International Adviser. She was previously global head of ESG insight for ESG Clarity and has been an investment journalist...