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Policy Contribution

Sustainable investing: How to do it

Sustainable investment is gaining momentum in Europe, but its current proposed taxonomy might hinder innovation in the field. In this Policy Contribution, Dirk Schoenmaker advocates for an active investment approach with concentrated portfolios, and sets out a six-point plan for sustainable investing.

By: Date: November 28, 2018 Topic: Finance & Financial Regulation

In the transition to a sustainable economy, companies are increasingly adopting the goal of long-term value creation, which integrates financial, social and environmental value. Investors have an important stewardship role to steer companies to sustainable business practices that will achieve long-term value creation.

Policy proposals from the European Union High Level Expert Group on Sustainable Finance, published in January 2018, promote a fiduciary duty to include sustainability in investment, company disclosure of sustainability information and a unified classification system (or taxonomy) of sustainable investments from which investors can choose. A fiduciary duty to include sustainability in the investment process and to disclose sustainability information can accelerate sustainable investment.

But an official taxonomy might stifle innovation in sustainable investment. While such a taxonomy might bring much needed clarity in certain markets, such as the emerging market for green bonds, the general approach to sustainable investment should be market-led. Investors and banks are best placed to assess which companies are prepared for the transition to a sustainable economy.

This Policy Contribution proposes an active investment approach to sustainable investment. This active approach is based on fundamental analysis of companies’ environmental, social and governance (ESG) factors and engagement with investee companies on material ESG factors. The aim is to uncover and realise companies’ social and environmental value alongside their financial value.

Building on previous research (De Jong et al, 2017), we present a six-point plan for sustainable investing. These points range from active investment in concentrated portfolios and long investment horizons, to deep engagement with companies and shorter investment chains.

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Working Paper

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What risks face the EU with regard to China’s strategic aims in trade policy and how can the EU respond? The US effort to isolate China poses particular risks for Europe. How can the EU counter such efforts with the aim of forging its own distinct trade policy? How should the EU move forward with reform of the World Trade Organization (WTO) in light of differing demands and aims of trading blocs like China and the US?

By: Anabel González and Nicolas Véron Topic: Global Economics & Governance Date: September 17, 2019
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Eastern Germans vote, think, and feel differently than western Germans do, as the results of the September 1 regional elections make clear. To help tackle the underlying economic causes of this divide, the federal government should introduce incentives to encourage foreign investment in the east of the country.

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Parliamentary Testimony

Promoting sustainable and inclusive growth and convergence in the European Union

This speech was delivered by Guntram Wolff at the Informal ECOFIN Meeting in Bucharest on 5 April 2019.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance, Testimonies Date: April 8, 2019
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