Many readers will know that the European Commission has launched a “European Financial Reform Agenda”. In that framework, an expert group issued a first interim report in July 2017, and a second report is expected this month, December 2017:

What is sustainable finance? The interim report suggests an attractive definition: “sustainable finance refers to a financial system that is promoting sustainable economic development rather than boom and bust; sustainable social development rather than inequality and exclusion; and sustainable environmental development rather than damaging the endowments of nature.”

The report develops a set of ideas aimed at promoting long term financing for structural change, but with a heavy focus on a shift towards a low carbon, resource-efficient and environmentally protective economy. There is much less, at least at this stage, on how to shift away from the values of Gordon Gekko “Greed is Good”. Somewhat plaintively, the report notes that:

“Many people, when asked, say that they do not want to exploit their fellow citizens or the planet in an unsustainable way. But fiduciaries currently tend to ignore these interests..”

Hence the need, as they state, to revisit the definition of fiduciary duties and stewardship codes.

So running through this interim report, alongside the main emphasis on environmental sustainability, is also the idea that the financial sector should contribute actively to reducing inequality and combatting social inclusion (as indeed to avoiding boom and bust). But when it comes to ideas on this particular point, those offered while useful, seem timid and conventional in sharp contrast to a much bolder approach to environmental sustainability. Here are the main lines:

– better access to capital funding for social enterprises for example for housing development;

– empowering citizens to make good financial decisions for example by trustworthy labelling of financial products;

– developing micro-finance and other funds dedicated to the less advantaged.

This agenda has been commented on by BEUC:


The core issue is the ethics or value system underpinning the financial sector. Is it a value system that drives a move towards all three dimensions of sustainable finance as defined above? Or is it a value system that works precisely in the opposite direction?

Can regulation constrain and re-direct “wrong” ethics in such circumstances? It is far from evident that there is currently a sufficient political consensus for regulatory action decisive enough to attempt such a role.

To underline the lack of political consensus today for strong regulatory action, see recent posts by Sven Giegold MEP and Finance Watch

And yet, the report states “a deep re-engineering of the financial sector is necessary”, covering not only regulation, but standards (norms), incentives and fiduciary responsibilities in a new policy framework…..” What is needed is “to reconnect finance with society”.

Brave words, not matched by brave proposals, not so far. Next step perhaps is to respond to the consultation launched by DG FISMA (closing date 22 January 2018) aiming at clarifying the fiduciary duty of institutional investors and asset managers taking account, inter alia, of social and governance factors, even though the consultation seems at best to be a very cautious toe put in the water before taking the plunge – or not.

And of course, let’s see what further conclusions the expert group of financial reform reach in their next report, promised for this December.

Robert Shotton