Original article by Hugh Wheelan republished from DeSmog

Climate campaigners should be thinking about the likely headlines coming out of the important European Parliament elections taking place from June 6-9.

The Parliament passes EU legislation alongside the Council of Ministers (representing EU Member State governments) following formulation by the European Commission in the EU’s tripartite rule-making system.

The latest poll of polls by Politico, released May 24, predicts a hard-right shift by voters for Parliament representatives, followed by related attacks on EU climate policy, which is now one of the lead policy objectives of the right across Europe.

The polls show the hard-right Identity and Democracy Group, which includes Italy’s Lega (LSP) and France’s Rassemblement National (RN) rising to 66 seats from 59 in the 720-seat parliament. That may now be optimistic given the expulsion last week of Germany’s Alternative für Deutschland from the group. 

The predicted rise would see it close in on Renew Europe, the pro-EU party that includes France’s Mouvement Democrate and the Dutch D66 and VVD parties, which is forecast to slip to 82 seats from 102.

A marginal rise in seats is also predicted for the right-wing European Conservatives and Reformists Group (ECR), from 72 to 74.

That will create serious climate headwinds in the European Parliament. 

‘Anti-Woke’

Right-wing parties now regularly oppose votes on environmental issues and are increasingly formulating their own “Motions for Resolutions” (proposals put forward for vote) with an anti-regulatory stance. 

The hard-right push won’t make the European policy weather though.

That’s made largely by the centre-right European People’s Party (EPP, Christian Democrats) – predicted to make a marginal rise to 176 from 174 seats – and the left-wing Progressive Alliance of Socialists and Democrats (S&D), also predicted to rise slightly to 144 from 140 seats.

The forecast is not cheery here either.

Sustainability campaigners say political support is waning for environmental, social and governance (ESG) – a moniker that started life in the push for policy and action in financial markets, but has become a broader catch-all term for sustainable economics.   

The EPP’s backing of ESG votes has dropped by 40 percent between 2020 and 2023, according to data compiled for nongovernmental organisations and seen by DeSmog. 

Even support from the left (S&D) has dropped by 10 percent, while Renew Europe backed 15 percent fewer ESG policy initiatives over the same period.

Why? 

Campaigners say part of the answer lies in the transatlantic wave effect of the so-called “anti-woke”, anti-ESG campaign from the United States to Europe. 

The U.S. anti-ESG movement has been driven largely by social wedge issues, such as LGBTQ+ rights and abortion, as well as diversity, equity, and inclusion (DEI) debates. 

In Europe, cost-of-living and migration are the arguments being deployed to derail, delay, or water down ESG policies. National nuances include stoked-up controversy around the transition to greener heating systems in Germany and France, or farmers and groundwater nitrate pollution in the Netherlands and Belgium.

Political attacks, from both right and left, on legislation related to ecodesign for sustainable products to create a circular economy, nature restoration, and the phasing out of internal combustible engines, have prompted the European Commission to delay green policies for fear of sparking an even wider backlash. Progressive groups have been slow to respond, fearing electoral consequences.

Green Deal

The European Union’s framework for a green, responsible economy looks roughly like this: The Green Deal provides the top-down policy direction for reducing emissions and green incentives, which feeds into the Green Taxonomy to classify what kinds of investments can be considered green. The Corporate Sustainability Reporting Directive (CSRD) requires companies to report on sustainable activities, and the Sustainable Finance Disclosure Regime (SFDR) forms an equivalent rulebook for investors. 

The EU’s regulatory activity between 2018-2024 has been a huge boost for sustainable finance. 

Has policy always been good? No. There is work still to do to make the rules pragmatic and understandable in terms of output. But this is the nature of regulation in these days of intense lobbying, counter-lobbying and political expediency. 

The end of the implementation phase for much of the EU’s regulatory advances comes next year. That will be a dangerous time. The cost of these policies will be fully visible for businesses, and ripe for pushback. 

In an inflationary economy, right wing parliamentarians will frame the financial and social implications of ESG regulations as unnecessary; too much, too soon, too costly. 

Anti-ESG actors are already weaponising the debate. 

Investors in the sustainable finance field expect the anti-ESG movement to become increasingly structured after the European Parliament elections. 

They believe populist parties will seek to co-opt concerns in the corporate and financial services sectors over the costs of ESG compliance, and seek to align with trade associations to increase opposition to new green rules. 

Indeed, European investors are already watering down their voting against pro-ESG shareholder resolutions, which is the primary way they can influence corporate activity.

A report earlier this year titled Voting Matters by ShareAction, the responsible investment campaign group, found that in 2023 just three percent of resolutions proposed to encourage companies to take action on carbon dioxide emissions and related environmental concerns were passed, compared to 32 percent in 2021. 

In the first instance, climate campaigners in Europe need to pay much more attention to the policy programmes of the parties and then get out the vote for the European Parliamentary elections.

Closer relationships will need to be built with the EPP on how to make green regulation work for voters in the longer term to head off the hard-right challenge. 

Much more clarity is also required on how green regulation can be used to incentivise companies and investors to adopt changes that will improve the living standards and environment of citizens over realistic timeframes. 

We should not shy away from the difficult debates and trade-offs that this will involve; indeed, we must be actively preparing for them. 

Hugh Wheelan is co-founder of Response Global Media, publisher of Responsible Investor. He has written extensively on ESG, investment, corporate, and sustainability issues for international publications including Financial News, The Guardian, and The Financial Times.

Original article by Hugh Wheelan republished from DeSmog