In a statement to the committee Dombrovskis said the EU had strengthened the regulatory architecture of the financial sector following the banking crisis in 2008. He said that Europe’s financial sector was now on a more solid footing than before the crisis with credit to the economy steadily improving and banks that are stronger and better capitalised. Following the hearing the committee said that they were satisfied that Dombrovskis was in a position to assume the portfolio. The European Parliament’s President Martin Schulz was due to inform Juncker that MEPs supported the transfer of responsibilities to Dombrovskis.
Meanwhile a joint statement by responsible investment pressure group ShareAction and anti-poverty and environmental groups, Global Witness and Friends of the Earth said the change of leadership for financial services in the European Commission could provide an opportunity for a re-think of the financial sector’s direction and purpose.
The group’s stated that, “We have long been concerned by the short-termist approach of Europe’s financial regulators, who have prioritised short-term efficiency through deregulation, while ignoring the social, environmental and governance issues critical to delivering markets that are efficient and stable over the longer term. As a result we are concerned that this will reintroduce the high risk financial strategies which caused the 2008 economic crisis.”
The groups believe that while Lord Hill was Commissioner the EU took a number of steps which not only increased the risks of financial instability within the Union. Furthermore they also believe that Hill undermined the EU’s global leadership on sustainable development and finance at the service of socially and environmentally sustainable societies. Despite numerous civil society groups raising these concerns with the Commission, they were barely discussed or acknowledged in the Commission’s conclusions from their “call for evidence on the regulatory framework for financial services”, the pressure groups claimed.
“The Commission’s approach ignores the fact that even in the short-term, sustainable investments have been demonstrated to outperform the market. It is blind to the substantial financially material risks for European companies and investors of not adequately considering environmental, social and governance factors for projects in Europe and beyond – for example the ongoing involvement of European investors in projects which violate human rights and cause land grabs. It risks Europe’s financial sector being an obstacle to the orderly transition to a low carbon, sustainable economy agreed to by the Paris climate change agreement and called for by the European Systemic Risk Board.”
ShareAction, Global Witness and Friend of the Earth calls on the Commission under the leadership of Dombrovskis to change direction and to ensure the EU becomes a leader in a world where financial resilience is defined by sustainability. This new approach should be defined by three elements. These are the realignment of the Commission’s reform initiatives, such as the Capital Markets Union, to serve the real economy and the needs of millions of people across Europe who are still suffering the consequences of that previous crisis in their daily life – unemployment, low wages, erosion of labour and social rights, and rising inequality; the development of an integrated sustainable finance strategy as a building block of the forthcoming EU 2030 Strategy and the introduction of financial and fiscal regulatory reforms which prioritise environmental, social and governance factors at every step of the investment chain, contributes to the Sustainable Development Goals and the Paris Agreement and to a low carbon, sustainable economy.