The social factor and labour rights
Our analysis .01
The financial industry is competence-intensive with skilled workers and a catalyst to the green transition. A strong and innovative financial sector can contribute to creating green jobs and limit the outsourcing of key competencies. Investments in research, professional development and production of green financial services will be imperative in the years to come.
It is crucial that the players in the financial industry are competent and updated on how ESG-themes affect investment, society and customers. Education on sustainability and accountability must be part of different training and competence programs, which should be a natural part of company-based training for employees. Furthermore, organized labour should be allowed to play a key part as provider of knowledge about accountability and sustainability. Union representatives and employee representatives in boards are well placed to carry the message of sustainable finance in their companies.
Capital is a crucial tool for change towards a more sustainable European economy. A regulatory framework that stimulates innovation and encourages business development must be aligned with the proper tax incentives to make change possible.
Measures to assess the social impact of investments go hand in hand with efforts to address environmental concerns and climate change. Both in Europe and globally, labour rights and trade union rights are being put under increasing pressure from corporations and investors. Social dialogue and collective bargaining is being undermined across Europe and globally, with notable examples from recent months in Estonia, Slovakia and the Czech Republic. The European Commission’s own refusal to make binding the social dialogue agreement on occupational health and safety in the hairdressing sector is another regrettable case in point (41). Many more examples can unfortunately be raised.
The tendency of undermining collective bargaining threatens the stability of labour markets as it reduces the ability for social partners to find common solutions to the need to adapt to future challenges. Moreover, it weakens wage earners’ bargaining power and wage development to the detriment of the purchasing power in general putting demand-driven growth under pressure. Thirdly, it weakens countries’ and regions’ capacity to handle the effects of globalization and technological change. This in turn increases inequality of income and opportunity both among different social and age groups and between different areas and regions.
The financial sector with its massive assets under management has a key role to play in addressing these concerns and it is therefore vital that the social perspective goes hand in with environmental and governance aspects. The EU commitment is clearly articulated by the TFEU article 151: “The Union and the Member States […] shall have as their objectives the promotion of employment, improved living and working conditions, so as to make possible their harmonization while the improvement is being maintained, proper social protection, dialogue between management and labor, the development of human resources with a view to lasting high employment and the combating of exclusion”. We expect the HLEG to take this broader perspective into account.
The recommendations from the HLEG should strive towards integrating environmental and social concerns, and include labour factors as a key element in a future classification system and policy for sustainable finance.
Our recommendations .02
The financial industry should look to authorities to facilitate debate around ethical considerations and facilitate dilemma training for employees, including integrating ESG into all sector specific training programs Transparency on the social impact of investments is urgently needed and metrics should be developed to support this aim. First, certain investment decisions may have profound impact on local employment in an area or region, both positively and negatively, and investors have a right to access this information. Secondly, a financial investment into any given institution may, just as with environmental aspects, impact social factors. For example, the actions of a certain companies or sector may be in breach of the right of collective bargaining, the freedom of association or the right to strike, acknowledged both in ILO Conventions and the EU Charter on Fundamental Rights, or undermine social dialogue.
In line with the above, classifications or standards of sustainability should entail minimum standards on labour rights. The ShareAction Workforce Disclosure Initiative is an interesting example in this regard. Any such initiative would also imply that, regardless of the design of the framework and the powers invested in the administrator, there must be no worsening of employee’s rights in any aspect due to an investment or due to a transition to intelligent and green banking.
Finance employees are key levers to facilitate the transition to green finance. A continuously sound and sustainable employment situation is a prerequisite. This includes but is not limited to: ensuring training and professional development with regard to green finance, taking into account differences in business models and national practice; providing time and resources for finance employees to provide good advice and exercising their fiduciary duty including integrating ESG factors in the cost-benefit analysis. Tailoring legislation of the financial sector to facilitate long-term prosperity and stable returns.
Customer-facing staff enhances customer satisfaction in terms of both service and experience – two key aspects that protect the consumers’ trust in the sector which in turn stimulates financial stability and transitions to green investing. Moreover, as robo-advice and fintech becomes more common they bring services to geographic locations that before could not be reached. On the flip side, the increasing possibility to monetize human advice risks escalating into pricing that excludes small and medium size investors that will not afford to pay for it. This in at a time where the OECD reports (2017) that financial literacy is worryingly low, and in a disharmonized financial system here the diversity of impact standards can be confusing. This is why affordable and equal access to financial services, including human advice, should be at the top of the sustainability agenda.
In general terms impact assessments analyzing the effects on employees must be made when drafting new EU legislation including measures on sustainability.
In addition, the mandate of the ESAs need to be revised, strengthened and clarified in order to enforce the social factors as described above.
Arvid Ahrin, Secretary General
Emelie Weski, Head of EU Affairs
Ahrin, A., Weski, E. (2017) ”The social factor and labour rights” in ‘NGO recommendations for the EU Sustainable Finance Action Plan’. First published in November 2017, and edited for 2nd Vol. in March 2018.
About the NGOs:
”We the NGOs have been individually, and in some cases collectively, working to reform Europe’s financial sector for a number of years. Together we represent twelve member organizations. Based on this long-term engagement we have put together this anthology of analysis, positions and recommendations for what we consider to be the priorities for an EU Sustainable Finance Action Plan.”
Read all the NGO recommendations in full from our collaborators here.