The European Parliament voted today on rules that would make companies more accountable to their shareholders, making a step towards a more accountable and sustainable financial system, according to Friends of the Earth Europe, ShareAction and WWF Europe.
The Shareholder Rights Directive is intended to tackle the lack of transparency between companies and shareholders – a significant barrier to challenging unsustainable business and investment practices.
Bethan Livesey, Head of Policy and Research at ShareAction said: "It is right that shareholders live up to their role as long-term stewards of companies, especially on environmental, social and governance issues. The measures in this Directive are a step towards a system in which shareholders are no longer "absentee landlords", an approach which has contributed to short-termism and economic crises."
The organisations welcomed elements of the directive that improve transparency around shareholders and ensures monitoring of companies on social and environmental impacts and corporate governance. However, a 'comply or explain' mechanism lacks the necessary teeth to create behavioural change for institutional investors.
Anne van Schaik, corporate accountability campaigner for Friends of the Earth Europe said: "Institutional investors must be made to disclose their engagement policies as a step towards reducing the environmental and social impacts of their investments. For example, the Dutch pension funds APG and PGGM must disclose their engagement policy with regard to their controversial investments in the palm oil company Wilmar."
Sebastien Godinot from WWF European Policy Office said: "This Directive is a win for transparency: investors will say publicly how they engage in companies they invest in and how they vote in their general assemblies, a critical information to monitor the consistency of investors' commitments for sustainable development."