Impact washing gets a free ride

Impact washing gets a free ride

With its Action Plan on Financing Sustainable Growth, the European Commission set the ambitious goal of “reorienting capital flows toward sustainable investment”. This objective seems ideally aligned with the strong momentum of impact-related concerns as to financial products among retail investors and numerous financial institutions. Concurrently, the evolution of several financial regulations at the EU level appears to support this movement. In this context, however, the recent EU Ecolabel Technical Report issued by the EC’s JRC has raised serious concerns as to its consistency with such trends. This papers shows that the approach developed in the Ecolabels Report is technically inaccurate, as it is based on flawed assumptions regarding impact in the context of finance, and does not comply with the EU’s own regulations as regards to Ecolabels. As such, the proposed approach appears to be a dead end, generating potential financial and legal risks, especially from a consumer protection perspective, and undermining the overall environmental objectives of the EU. This paper suggests an alternate approach, consistent with the state of scientific research and compliant with existing rules on the Ecolabel and consumer protection, which centers on implementing an Environmental Management System to design and execute the investment strategy.

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2019-07-17T13:10:08+00:00