First created in Paris in 2002, Eurosif – the European Sustainable Investment Forum – is a Brussels-based membership organisation with a mission to promote sustainable development through financial markets. Over the last 22 years, they have established themselves as the leading pan-European association promoting sustainable finance at the European level. Eurosif’s membership is comprised of Europe-based national Sustainable Investment Fora (SIFs), most of which have diverse memberships themselves including asset managers, institutional investors, index providers and ESG (Environmental, Social, and Governance) research and analytics providers.
One of the main conclusions of their JEDI workstream (Justice, Equity, Diversity and Inclusion) is that there is a strong appetite among the investor community to implement improved practices, data collection and JEDI investment, but there is also a lack of information to follow. The Eurosif Community of Practice has been successful in addressing these issues by emphasising the usefulness of exchanging best practices and concrete ideas to tackle these challenges. Eurosif and its members are committed to the growth and integrity of significant sustainable investment flows, supporting European policymakers in accelerating a just transition and a fully transparent investment market. HQ spoke to Aleksandra Palinska, Executive Director of Eurosif, about this JEDI workstream.
How did you imagine these communities of practice based on the “Justice, Equity, Diversity and Inclusion” quadrilateral?
Although the importance of a just transition is recognised, little has been done to date in practical terms to address the growing inequalities in societies, wealth, education and insufficient diversity across companies, especially at management and board levels. Despite the growing prominence of impact investments, including those focused on social issues, there is little awareness of how to promote (JEDI) through investments.
Finance is a powerful lever for positive change in the economy, which applies to both social justice and the environment. Based on discussions with investors, we realise that they are willing to incorporate JEDI considerations, but face challenges regarding the acquisition and availability of data and also need guidance regarding practical implementation. It is very useful to have a space where you can exchange ideas and best practices with peers, which is what the Eurosif community of practice has offered. We have also invited various experts to our Community of Practice debates, sharing knowledge and ideas to help investors dismantle the mechanisms that drive social inequality.
When it comes to climate investment funds, how do you make the case that racial and gender diversity, equal opportunities and social impact can contribute to the original goal of investors and industry members?
Besides the moral argument, marginalised communities are disproportionately impacted by the effects of climate change, a point made by our podcast guest Kim-Smouter Umans, Director of the European Network against Racism. As of 2015, the G8 nations were responsible for 85% of global excess CO2 emissions. High-income countries, therefore, bear a greater degree of responsibility for climate damage. Research by the Climate Finance Fund has proven the correlation between DEI efforts and the overall sustainability performance of portfolio companies. Diverse teams also build better, more resilient and profitable businesses. As a result, there is a business case and a moral case for investing in DEI principles.
Eurosif’s JEDI Community of Practice has sought to develop a wider understanding of the notion of climate justice. By investing through the JEDI lens and encouraging improved diversity at different levels of companies, a higher degree of consideration is given to marginalised communities to ensure a just transition to a more sustainable economy. Ultimately, these issues are symbiotic: climate change increases social inequalities, while efforts to alleviate them tend to bridge the gap.
During the first phase of the project, the communities of practice identified obstacles such as the difficult access to DEI-related data and the legal risks of collecting data. What conclusions did you reach?
The challenge is the lack of ESG data available on everything beyond gender diversity, such as age, ethnicity, social background, disability, etc. The misconception is that GDPR actively prohibits the collection of this data, which is not the case. Article 9 of GDPR effectively allows the collection of special categories of data when the person has given explicit consent. This encompasses DEI data collection, which can, in fact, be done on the basis of employees’ consent, ensuring that surveys are anonymous. GDPR also allows EU Member States to implement a specific basis for measuring diversity initiatives in their local laws. However, Member States have not used this prerogative.
To resolve this issue, anti-discrimination organisations encourage the collection of DEI data, as long as it is done in accordance with human rights. One of the main principles is to let people identify themselves with their preferred ethnic backgrounds. Setting the correct categories is also important, since failing to do so can influence the entire data collection process. However, this is difficult in some EU member states like France, where local law does not allow the categorisation of people based on their race/ethnicity. In these cases, other data will need to be collected to build up a picture of an organisation’s diversity, such as nationality, place of birth, mother tongue, etc.
The Corporate Sustainability Reporting Directive and European Sustainability Reporting Standards (ESRS) constituted a great opportunity to improve the availability of DEI disclosures. Unfortunately, these disclosures did not make it into the final version of the ESRS. This is something to consider during a review of these standards.
Is there any possibility of including JEDI-aligned social bonds to revert these proceeds to activities sensitive to climate justice or social impact?
The EU Green Bond Standard (EU GB) is aimed at financing projects that contribute to environmental sustainability. However, this standard has already been adopted, therefore, from a legislative standpoint, there is no possibility to include any criteria connected with JEDI at the moment. That said, the new EU legislative mandate constitutes a great opportunity to consider measures that can support a just transition to sustainable growth. Currently there is a clear gap in the EU sustainable finance framework with regard to defining and standardising socially sustainable investments. This could be addressed by creating a social taxonomy or establishing a set of criteria defining social investments in the context of the review of the Sustainable Finance Disclosure Regulation, expected in 2025.
Finally, how do you see the current associative landscape with regard to social justice and DEI from a management and leadership perspective?
As a starting point, associations need to collect the appropriate data from their employees, which, as already mentioned, is permitted by the GDPR and remains possible even in countries where laws prohibit certain terms or categories. In our podcast episode with Prof. Lokke Moerel, she explained that the GDPR actually establishes the proper legal conditions to collect this data, in line with data minimisation, privacy-by-design and security. This gives associations a picture of their own DEI status and will help identify areas for improvement, acting as a springboard for internal analysis as to why certain groups are under- or over-represented, and subsequently developing measures and goals to address this. Transparency on such matters is a starting point for making management decisions to enhance diversity. What helps is raising awareness of the benefits of diversity in organisations, which can render better results. Naturally, advancing social justice can also go beyond the operations themselves and become part of one’s external political advocacy.
Supported by the Union of International Associations (UIA), the International Association of Professional Congress Organisers (IAPCO) and the Interel Group, the global public affairs and association management consultancy, Headquarters Magazines serve the needs of international associations organising worldwide congresses.