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 The news that shaped the week in responsible investing 


Dear SRI reader,
While the Capital of Europe is under siege due to Trump's visit this week, our thoughts remain fixed on the decision-making powers of the European legislative machine, as we hold our breath for the Parliament vote on CbCR on the 30th of May.

Eurosif has continuously followed the developments of this dossier very closely. In 2015, our 
 position on CbCR elaborated the extent to which a transparent tax system plays an invaluable role in the promotion of economic growth, by helping governments achieve their missions, making the much needed infrastructure investments to ensure the right premises for stable growth and advancement. A legitimate and sustainable tax system is able to support the development of a consumer class with access to functional education, infrastructure and healthcare system.

A set of wider reputation risks linked to the ‘licence to operate’, which are directly connected to the operational risks, confront companies when the relation with their host government is tarnished as a consequence of abusive tax practices or lack of transparency, which consequently can lead to delays or rejection of approvals from national authorities.

Similarly, the short-term financial gains ‘aggressive tax optimisation’ practices can bring, are all too often offset by medium to long-term repercussions related to reputation risks and consequent brand erosion. Risks are derived from both actual tax practices and a related lack of transparency. Failing to disclose one’s tax position constitutes as much of a risk as the aggressive tax practices themselves.

Investors need to have access to relevant and useful information, therefore not only on paid tax amounts but also on other data that is connected to contextual information, including turnover, number of employees, revenues, operating profit and losses before taxes, public subsidies, capex and free cash-flow on a country by country basis. This contextual data could serve to define tax activity KPIs that would allow for better peer comparisons and investment decisions. Meeting investors' expectations would also help remedy market distortions which are made possible today by the corporate lack of transparency, to the advantage of large multinationals over SMEs.

In 2016, we called for an assertive move from the Commission to address the lack of transparency to prevent further aggressive tax planning by companies and increasing the quality of disclosure with public CbCR across industries. The legislative proposal today presents potential room for key information to still be missing. By limiting tax transparency to the European Union and the countries on a tax havens list, the risk of allowing for multinationals to shift their profits to jurisdictions which are not covered by the proposal, still remains too high.

Eurosif is asking members of the European Parliament in the ECON and JURI Committees to agree to amend the Commission's legislative proposal in a meaningful way and extend transparency to all countries on a worldwide basis.
Happy reading,
Flavia Micilotta
- Eurosif's Executive Director
Impact investing on the rise in France (Investment Europe) Some 15 French asset managers are currently managing €1.26 bn in impact investment funds, local venture-capital investment association Afic has reported. Investments in the asset class by these managers have been multiplied by more than five over a five-year period, Afic said.

Statoil, Eni and Total wake up to carbon bubble risks (GreenBiz) According to a new report released by CDP and four international investor networks, some of the world's largest oil and gas companies have significantly improved their climate risk disclosure in recent years in response to investor and shareholder lobbying. Yet despite highlighting progress, the report also stresses that several fossil fuel majors, including industry powerhouse ExxonMobil, are still failing to embrace climate risk disclosure, regardless of mounting pressure from their investors.


Commission welcomes agreement on effective rules to resolve double taxation problems (European Commission midday express) The Commission has welcomed the agreement reached today by Member States on new measures to help resolve double taxation problems for all citizens and businesses in the EU. Proposed by the Commission only seven months ago, the new rules will allow businesses and citizens to reduce double taxation, one of the biggest obstacles to the functioning of the Single Market. 

Vulnerable countries sound alarm on climate finance (EURACTIV) The countries most exposed to the effects of climate change are still waiting for the finances they were promised in Paris in 2015. Eighteen months after the adoption of the Paris Climate Agreement, the most vulnerable countries are worried by the lack of progress that has been made so far. They hope their example will spur the most developed countries into action.

Combating climate change could boost G20 economies, OECD says (Eco-Business) Investing $6.9 trillion per year in clean infrastructure between 2016 and 2030 in G20 countries would help limit global temperature rise to below 2 degrees Celsius.
The Big Green Bang: how renewable energy became unstoppable (Financial Times) It is early, but the evidence is mounting. Wind and solar parks are being built at unprecedented rates, threatening the business models of established power companies. Electric cars that were hard to even buy eight years ago are selling at an exponential rate, in the process driving down the price of batteries that hold the key to unleashing new levels of green growth.

Church of England fund ranks as top world performer (Fund Strategy) The Church of England’s investment fund has seen “stellar” returns in 2016 as it ranks among the world’s best performing funds of this type. The Church Commissioners annual report states the fund’s return on investments more than doubled to 17.1 per cent in 2016 from 8.2 per cent in the previous year.

Working paper: Healthy ecosystem metric framework (CISL) Investors and companies want to demonstrate their positive impacts on natural capital and show they are reversing the trend of natural environment degradation. The challenge is to identify metrics that are relevant for businesses’ decision-making processes, whilst being simple and practical for investors to use. This working paper outlines the concept for such metrics as developed by members of the Natural Capital Impact Group. 

Focus now shifts to Exxon AGM as it emerges 67% backed Wespath’s resolution at Occidental (Responsible Investor) Exxon Mobil has written to its shareholders about the resolution filed by shareholders following comments by investors it says “incorrectly characterize” its position in a sign that the ‘proxy fight’ between the company and its investors over climate change is heating up ahead of its annual meeting at the end of the month.

ERAFP plans €50 million low carbon equity fund investments (Investment & Pensions Europe) France’s €27bn civil service pension scheme is planning to invest €50m between now and the end of the year in international equity funds aimed at combating climate change.
Asset Managers
BEPS poses ‘collateral damage’ threat to AM industry – conference hears (Investment Europe) Tax experts taking part in a panel discussion at the recent Guernsey Funds Forum in London warned that the asset management industry could end up becoming the victim of ‘collateral damage’ as the proposed Base Erosion and Profit Sharing (Beps) regime is implemented.

Shell shareholders reject emissions target proposal (Reuters) Royal Dutch Shell (RDSa.L) shareholders on Tuesday widely rejected a proposal by an environmental group calling for the oil company to set and publish annual targets to reduce carbon emissions.

Doubts over EU rules to hold fund managers to account (Fund Strategy) Advisers have urged managers not to use fund factsheets as just a “backside covering” exercise as questions remain over how effective new regulations will be in making fund information clearer and more useful.

"The sustainability dimension has to be part of all EU policies.

Jyrki Katainen is the European Commission Vice-President for Jobs, Growth, Investment and Competitiveness. He was talking at the European Business Summit on Monday. 
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