Welcome to Better Europe’s weekly update on EU Affairs.
EU STOPS THE CLOCK ON SUSTAINABLE BUSINESS LAWS
Good news – EU Member State representatives indicated their governments agree to the “stop-the-clock” proposal to postpone sustainability reporting for two years, a message that Europe’s large companies have been desperately wanting to hear. The decision will save them a lot of resources that can be reinvested into competitiveness, which is desperately needed in view of sudden geopolitical winds of change. And even better news is that the rules on due diligence will also be postponed by one year, which should give a breath of relief of companies that are busy to survive and therefore not able to dedicate time and resources to checking their supply chains. After all, there is nothing wrong with a bit of deforestation, forced labour and child labour, all things that the legislation aims to prevent. Meanwhile MEPs don’t want to be seen doing less, and are expected to vote next week on their version of the “stop-the-clock” text, approving most likely the exact same delay of two years for sustainability reporting and one year for due diligence. After months of uncertainty, the decision provides the legal certainty that large businesses have been crying out for, at least for the coming year, because it remains uncertain what will be decided on the actual substance of the reporting and due diligence obligations, a decision-making process that is expected to take most of the remainder of this year.
COMMISSION DESIGNATES CRITICAL RAW MATERIALS PROJECTS
No less than 47 Strategic Projects were designated this week by the Commission as strategically relevant to secure and diversify access to raw materials, as part of the implementation of new Critical Raw Materials Act. The 47 projects, all in the EU, will benefit from “coordinated support” by member states, banks and the Commission to become operational. The expert assessments of individual projects are not made public, so unfortunately it remains unclear why these specific projects were chosen, other than that they all make a “meaningful contribution to the security of the Union’s supply”, have a cross-border nature, and for the magnesium and tungsten projects, are relevant for the defence industry. It’s also unclear how the initiatives will impact local communities and ecosystems, especially as civil society was not involved. The list includes initiatives for extraction, refining, processing, and recycling of critical raw materials, to ensure the EU can “fully meet” 2030 benchmarks for lithium and cobalt, and move towards the benchmarks for graphite, nickel and manganese.
WHO NEEDS FINANCIAL ADVISORS WHEN YOU CAN HAVE AI ADVICE?
For decades, consumer and investor organisations have been campaigning against the remuneration model for financial “advisors” who they argue should be called financial “sales people” instead, because that is how they make money: sell financial products, preferably the ones with the highest kickbacks (sorry, inducements). The solution: ban this distribution model in favour of independent advisors, a model introduced in the UK and then in the Netherlands following a huge mis-selling scandal. But with the Brits gone and thanks to a strong industry lobby the tide has changed — the Dutch even had to ask for permission to retain their “provision ban” in the latest iteration of the Commission’s Retail Investment Strategy, stuck in trilogues under the threat of a Commission withdrawal. However, as consumers are moving away from complex layered high free invest products towards exchange-traded funds, many advisors might soon find themselves caught up by the market. And now, even AI is ready to take their job, with supervisor ESMA finding itself in a position where it has to warn that AI tools are not supervised and cannot accurately predict financial markets…