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The European approach in growth is, generally, a result and an outcome of the EU-wide adopted political economy pattern based on the concept of “social market economy” in which the regulatory and governance strategies have been dominating for decades. The EU has conducted recently several “hybrid efforts” on strengthening the EU’s leadership in sustainability, specifically, the EU co-legislative institutions increased the governance’s efforts; e.g. the Council that adopted a new regulation on ESG rating last November.
Slow progress in SDGs
The Europe Sustainable Development Report covering 2023/2024, estimated that “halfway into the SDGs, the EU achieved (or was on track to achieve) a little over two-thirds of the SDG targets”.
The report also indicated that the SDG’s progress in Europe has stalled since 2020; besides, even before the pandemic “progress in the EU was too slow to achieve all of the SDGs by 2030”.
For example, during first five years in the SDGs (2015-19), the progress has been three times faster than during the period 2019-22.
The global SDG progress has also stalled since 2020 due to multiple crises, with some of the poorest and most vulnerable regions in the world showing reversals in SDG progress.
More info in: https://sdgtransformationcenter.org/online-library
During last decade, the EU-wide SDG implementation index has grown only from 61 to 73 points: in Northern and Western Europe the SDG implementation has been at the level of 73 points while even less than 60 points in Southern, Central and Eastern states.
Thus, out of 17 SDGs, in the category “moderately improving” in implementation there are presently nine SDGs, “on track or maintaining SDG achievement” – three SDGs (6,9 &17) and “stagnating” – five (2.4, 12, 13 &16)…, which all makes the general implementation index modest 72 points in the EU-wide.
Source and citation from: https://s3.amazonaws.com/sustainabledevelopment.report/2024/europe-sustainable-development-report-2023-24.pdf , (pp.15, 16 & 122).
The role of governance: ESG rating
Most active has been the European Parliament, EP in adopting (November 2023) a series of amendments to EU Treaties aimed at strengthening SDG implementation within the EU and in the Union’s external actions. These amendments are incorporating ambitious EU provisions in reducing global warming, safeguarding biodiversity, promoting non-discrimination and diversity, improving health and education, as well as ensuring full employment and accelerating social progress.
Sources:
a) EP Proposals for the Amendment of the Treaties (November 2023); Resolution in: https://www.europarl.europa.eu/, document/TA-9-2023-0427_EN.pdf;
b) EP Resolution (June 2023) on the implementation and delivery of the Sustainable Development Goals, in: https://www.europarl.europa.eu/, document/TA-9-2023-0250_EN.html.
Last November, the Council adopted a new regulation on ESG rating activities; the new rules aim at making rating activities in the EU more consistent, transparent and comparable in order to boost investors’ confidence in sustainable financial products.
The ESG ratings show a company’s or a financial institution’s sustainability profile, by assessing its impact on society and the environment and its exposure to risks associated with sustainability issues. ESG ratings have an increasingly important impact on the operation of capital markets and on investor trust in sustainable investment products.
The new rules aim to strengthen the reliability and comparability of ESG ratings by improving the transparency and integrity of the operations that ESG ratings providers carry out and by preventing potential conflicts of interest.
However, the ESG rating providers established in the EU have to be authorised and supervised by the European Securities and Markets Authority. They will have to comply with transparency requirements, in particular with regard to their methodology and sources of information. ESG rating providers established outside the Union that wish to operate in the Union, will need to obtain an endorsement of their ESG ratings by an EU authorised ESG rating provider, a recognition based on a quantitative criterion, or be included in the EU registry of ESG rating providers on the basis of an equivalence decision.
More on regulation on the transparency and integrity of ESG rating activities, and amending Regulations 2019/2088 and 2023/2859, in: https://data.consilium.europa.eu/doc/document/PE-43-2024-INIT/en/pdf
ESG – European history
The ESG’s history goes back to September 2015, when the UN General Assembly adopted a new global sustainable development framework – the 2030 Agenda for Sustainable Development
(2030 Agenda), having at its core the Sustainable Development Goals, SDGs. In addition, the UN-supported Principles for Responsible Investment has had more than 5 300 signatories representing over €120 trillion of assets under management.
Already in November 2016, in the Commission’s Communication “Next steps for a sustainable
European future: European action for sustainability” the SDGs “have been linked” to the Union’s policy framework to ensure that all Union actions and policy initiatives “take the SDGs on board at the outset”.
In June 2017, the European Council confirmed the commitment of the Union institutions and that of the member states to the implementation of the 2030 Agenda in “full, coherent, comprehensive, integrated and effective manner”, in close cooperation with partners and other stakeholders.
Then, in December 2019, the Commission published a communication “The European Green Deal” followed by June 2021 the European Climate Law in the form of Regulation 2021/1119 by the European Parliament and of the Council3, which “enshrines in Union law” the goals set out in the European Green Deal for the EU’s socio-economic development to become climate-neutral by 2050.
Reference to the EU climate law regulation 2021/1119 in: OJ L 243, 9.7.2021, p. 1.
More on ESG regulation in: OJ C, C/2024/883, 6.2.2024, ELI: http://data.europa.eu/eli/C/2024/883/oj. General reference to https://data.consilium.europa.eu/doc/document/PE-43-2024-INIT/en/pdf