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EC considers SRI directive

December 2000

Pressure is growing on the European Union to produce a directive that would force pension funds to disclose their policy on socially responsible investment (SRI).

Support for a directive, which would probably be based on the UK government’s 3 July pension disclosure regulation, is growing among members of the European Parliament (MEPs), and is being discussed on an informal basis.

‘It’s certainly being talked about in Brussels and I think it will be transferred into a European directive within the next five years,’ said Richard Howitt, MEP for the East of England and a leading advocate of SRI in the parliament.

‘Things are at a very early stage but I do believe there will be a directive and there’s a big political interest in this issue,’ he said.

The UK pensions disclosure regulation, which requires pension fund trustees to state their general position on SRI, has attracted considerable interest in mainland Europe, where other countries, including France, Sweden and Germany, appear to be moving in the same direction.

In France, the parliament voted in October for an SRI regulation covering Employee Savings Plans, similar to the one now in the UK. However, the final wording of the text will not be known until 17 January.

In Sweden, new arrangements for state pension funds will include SRI criteria, provided these do not affect financial performance. Final details, including the number of funds the SRI criteria will be applied to, have yet to be decided.

And in Germany, fundamental reform of pension law being drawn up by the coalition government could also lead to a similar regulation, though there is no political consensus on such a move at present.

A European directive would require all European member countries to introduce similar regulations or laws to a set deadline.

Russell Sparkes, fund manager at the Central Finance Board of the Methodist Church in the UK, which runs its own SRI fund, claimed that a ‘paradigm shift’ on SRI was taking place in Europe and that it was inevitable other governments would follow the UK line.

‘It’s only a matter of time before they apply similar regulations in other countries, and I suspect the European Union will come out with some incentives on SRI along the lines of the UK regulation,’ he said.

Reto Ringger, chief executive of the SAM Sustainability Group in Switzerland, claimed there was widespread support for such a move in Europe. ‘This kind of transparency is the way forward and some kind of regulation is right for Europe,’ he said.

Backroom discussion of an SRI directive is one of a number of signs that the EU is becoming increasingly committed to introducing initiatives that encourage corporate social responsibility. The European Commission last month announced that it had agreed to hold a European year on corporate social responsibility in 2005, and EU action on social and environmental reporting may also be forthcoming if MEPs can overcome political disagreements over a review of European company law in Brussels.

The EU review is currently stalled due to disagreement between various governments on what levels of employee involvement in company affairs should be required by law, but if a compromise can be agreed on that issue, MEPs will then consider whether civil servants should draw up legal guidelines and requirements on social and environmental reporting.




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