On 29th May the European Parliament voted in favor of the report on Sustainable Finance promoted by the Greens/EFA group, following the publication of the EU Action Plan on sustainable finance by the European Commission on 8th March. The report approved by the Parliament defines its position in favor of investments that are more mindful of the effect on the climate and on the environment, including measures like checking whether financial institutions’ portfolios are aligned with the Paris Agreement.
While this is an important step towards climate justice and the accomplishment of the climate goals set by the Paris agreement, a greater ambition is needed to include measures so that investments take into account climate, environment and also the lives of the people in it. Our view was shaped by several conversations and encounters with representatives of communities outside Europe that have been affected by the activities of multinational companies that were at least partially funded by European banks.
The leading MEP promoter of the sustainable finance report, Molly Scott, acknowledged yesterday in a press release that human rights and the social impact of investments should be taken into account more prominently when it comes to investments. We join her voice in saying that at the EU level, mandatory due diligence should be present on investments. This is essential to make sure that investments around the world do not go against human lives and that the livelihoods of communities where the projects are implemented are respected and protected.
The case of the burst of Fundão dam in Mariana, Brazil, is an example of a disaster that could have been prevented if a due diligence approach was put in place. The “Mariana disaster”, explored by CIDSE in this multimedia dossier, brought an enormous trail of destruction including the death of 19 people, the destruction of many villages and the pollution of surrounding rivers. European banks HSBC and BNP Paribas have been involved in the funding of the company operating the dam, Samarco Mineração SA.
The case was analyzed in the report “Dirty Profits”, released in May 2018 by the organization Facing Finance. The report exposes how the investments of ten European banks in ten extractive companies continually violate human rights and damage the environment. It is unclear according to the report whether the banks involved with Samarco conducted their due diligence properly. If they had done so, the report says, they should have discovered that the company repeatedly failed to address basic security measures and environmental protection standards, including the lack of an emergency evacuation action plan for the Fundão Dam, a legal requirement in Brazil for dams classified as having a high potential to cause damage.
This tragic example, as the others analyzed in the Dirty Profits report, highlights how important it is to ensure that European investors and people are confident that their investments, savings and pensions are not used to fund unethical companies. That they are not contributing to climate change and not destroying people's lives on the other side of the world.
Many lives could be saved by a thorough analysis of the investments and a new, more transparent approach to finance.