“Developing and promulgating a set of principles of corporate governance and stewardship that incorporate long-term and sustainable value creation and improve investor governance should be a central objective at the European level.”
Sustainable finance and long-term value creation are two requisites which must go hand in hand if the current crucial challenges to mankind are to be effectively addressed. So how to get the balance right?
Besides addressing crucial environmental, social and governance issues, the concept of sustainable finance should translate into investment products that are exemplary in complying with EU investor protection and conduct of business rules. An investment product can be as ‘green’ or ‘sustainable’ as you like, individual investors as long-term and pension savers will not entrust their lifetime savings to such products if they do not address their primary need for sustainable long-term value creation. Pension adequacy is at stake and defusing the pension timebomb is also a key challenge for European citizens. To have a real impact on ESG issues, sustainable finance, its taxonomy, its benchmarks and its ecolabels must incorporate the most basic of requirements for sustainable finance such as fair, transparent, clear and non-misleading investor information. The trust of EU citizens as savers and investors is at stake.
Full disclosure of all fees and other costs is more important for investors than generating returns similar to, or better than, a target benchmark . Both retail and institutional investors are willing to forgo some returns in order to get total transparent services.
Whereas it is crucial for public policies to be put in place that address negative externalities, “green” investment products should not be developed at the expense of individual long-term and pension savers. If sustainable finance is to achieve what it set out to do, it should first of all ensure long-term and sustainable value creation and pension adequacy for EU Citizens as savers and investors. The sustainable investment industry needs to, at the very least, lead by example and apply ESG criteria to its own activities – especially the Governance one – and be exemplary in terms of compliance with EU consumer and investor protection rules. Ideally, an integrated and sustainable long-term horizon framework should be woven into investment management practices and be integrated in the fundamental analysis and decisions. Transparency, designing the adequate indicators and properly measure and report those, are key success factors.
 Interim Report, European Commission High-Level Expert Group on Sustainable Finance, July 2017, p.60
 The Next Generation of Trust, CFA Institute, 2018
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