Macron wins + Jansa loses + Gaps in DSA

Dear reader,

A triumph for Emmanuel Macron: France’s president has prevailed in the runoff election – with a clearer lead than all polling institutes had predicted. The decisive victory should give his LREM party some tailwind for the third round of the elections, namely for the National Assembly on June 12 and 19.

For France’s democracy and for the European idea, however, the election results are another warning signal: The political fringes are stronger than ever, and the “Republican Front” is crumbling. Macron has contributed to the fact that the other center parties are only shadows of their former selves. As a result, dissatisfied voters basically have no choice but to vote for extreme parties or not to vote at all. Consequently, the number of non-voters has risen to record levels.

For now, however, the liberal, pro-European forces have won – in France as well as in Slovenia. There, the would-be authoritarian Prime Minister Janez Jansa, who sometimes mocks critics on Twitter, suffered a defeat. He was defeated by a lateral candidate, the former energy manager Robert Golob.

Shortly before the election, the French Council Presidency achieved a success: On Saturday night, the Council and the European Parliament agreed on the Digital Services Act. The legislation updates the 20-year-old basic rules for the digital economy. However, the specifications for online advertising that have now been agreed on contain considerable loopholes, as Torsten Kleinz analyzes.

I wish you a good start to the week.

Your
Till Hoppe

Macron’s election victory: triumph and warning signal

The last polling stations had just closed, and the forecasts TV channels predicted a clear victory for Emmanuel Macron, when the first well-wishers had already come forward. “I look forward to continuing our excellent cooperation,” tweeted Commission President Ursula von der Leyen. German Chancellor Olaf Scholz congratulated Macron by telephone shortly afterwards, saying the French voters’ decision also meant “a clear commitment to Europe and the European unification process”. Dutch Prime Minister Mark Rutte, Lithuanian President Gitanas Nauseda, and Canadian Prime Minister Justin Trudeau also hastened to convey their congratulations.

There is great relief among EU and NATO partners that they can continue to work with Macron in the future and not with his rival, Marine Le Pen. “The French have just averted a historic declaration of bankruptcy for Europe,” European Parliament Vice President Nicola Beer (FDP) told Europe.Table. Le Pen had threatened a xenophobic Grande Nation hostile to the EU.

At 59 percent, Macron’s election victory was clearer than had been expected two weeks ago, after the first round of voting. Many voters for the third-placed leftist Jean-Luc Mélenchon decided to vote for the incumbent after all in view of the alternative. Macron thanked them during his appearance near the Eiffel Tower, visibly moved. Macron said he knew that not all voters had voted for him out of conviction and that this would commit him for the next five years.

The election shows “how deeply divided the country is, how deep the frustration of many French people is,” said Jens Geier, head of the SPD group in the European Parliament. Macron must therefore do more for social justice. Not only did far more voters vote for Le Pen than in the runoff election five years ago (33.9 percent) – the leader of the far-right Rassemblement National (RN) herself, therefore, sold her defeat as a “resplendent victory”. Moreover, voter turnout was historically low at 71.8 percent.

‘Political spring looks different’

“A political springtime of the 5th Republic looks different,” says Nicola Beer: “Emmanuel Macron is facing a politically deeply divided country at a time when historic strength is expected from Europe – which must stand united and with full force against the war in Europe. How strongly the president can fulfill this role now depends above all on the outcome of the parliamentary elections in June.

Both Le Pen’s RN and Mélenchon’s “La France Insoumise” believe they have a chance of securing a majority in the National Assembly. A so-called cohabitation would mean a protracted government formation, Beer warns. “For Europe, a France that is preoccupied with itself for months would be a bitter damper on its ability to act.”

However, Macron’s unexpectedly clear victory in the runoff is likely to give his LREM party some tailwind. Marine Le Pen has again failed to enter the Élysée Palace at the third attempt. All efforts to normalize her party have not been enough.

In the televised duel against Macron, she had appeared almost defensive. Macron repeatedly pointed out that Le Pen’s new strategy is only packaging. Underneath it was still the far-right, which wanted to harm Europe, scare off immigrants and think nationalistically. Thus, he repeatedly stressed in recent days, “The election is also a referendum on Europe.” Last night he announced that his first trip abroad would take him to Berlin.

Still the president of the rich

That Le Pen almost made it, however, that is also Macron’s fault. He has mastered France’s crises and is appreciated by many for it; he is also regarded as a reformer who has revived the French economy.

However, there are also many French people who criticize him and even despise him. He is still the “president of the rich”, the privileged elite, his constituency. He has lost this reputation since he abolished the wealth tax and converted it into a tax on real estate ownership.

The poorer French are angry with him. They are angry about being left behind. Every decision that limits their purchasing power confirms their attitude toward Macron. A planned fuel price increase, for example, led to the protest of the yellow vests. But many young people are also disappointed in him because he is not socially-minded enough and, in their opinion, not committed enough to climate protection.

Le Pen, on the other hand, scored points with her closeness to the people. That she did not make it, after all, the reason also lies in an anti-Le Pen front that formed a few days before the runoff. Media reports piled up at home and abroad about how France and Europe could suffer if Le Pen came to power. Economists described the country’s economic decline.

On Facebook, many French people called against a vote for Le Pen. Parents tried to influence their children not to abstain from voting and to vote for Macron and Europe. There were protests against right-wing populism all over the country, but that does not mean support for Macron. The slogan was, “Better a vote that stinks than a vote that kills.”

All eyes were on Jean-Luc Mélenchon’s voters in the first round of voting. Many of them are young, well-educated people. Many said after the election that they didn’t want to vote, they then changed their minds. Better Macron than Le Pen. According to voter surveys, about 40 percent of Mélenchon voters ultimately voted for Macron, 17 percent for Le Pen. Tanja Kuchenbecker and Till Hoppe

DSA: advertising regulation with loopholes

The marathon negotiations were followed by superlatives: Commission President Ursula von der Leyen called the agreement reached on Saturday night on the Digital Services Act “historic”, while the European Parliament’s rapporteur, Christel Schaldemose (S&D), spoke of a new “global gold standard”. German Justice Minister Marco Buschmann praised that “the way is now clear for uniform requirements for social networks and other online platforms in Europe”.

At least the rules for online advertising are less strict than many in the European Parliament had hoped. The response has been correspondingly positive: The digital association BVDW sees “a lot of light”, but also fears shadows; MEP Patrick Breyer (Pirate Party) complained that “industry and government interests” had prevailed over digital civil rights.

In Parliament, the Social Democrats, the Greens, and the Left had originally called for a complete ban on “surveillance advertising“, but were already unable to get their way internally. Instead, in the trilogue, the Parliament demanded a ban on the evaluation of personal data of minors for advertising purposes, extended information obligations, and a ban on misleading designs, so-called dark patterns.

These demands are now reflected in the final result of the negotiations. Martin Schirdewan, the rapporteur for the Left Party, spoke afterwards of a “great success for the protection of users, even if a complete ban on personalized advertising would be desirable”.

However, the nightly compromise has significant gaps in Articles 23 and 24 of the DSA, available to Europe.Table in its final version. For instance, it ignores the distributed nature of today’s advertising business. True, online platforms are no longer supposed to play ads based on certain categories, such as sexual orientation or health data. But that doesn’t stop middlemen from doing this targeting outside the platforms. Instead of targeting people with diabetes, for example, they can target users who have subscribed to a diabetes support group.

Gaps for targeting

Personalized advertising would thus become contextual advertising, which opponents of today’s advertising business see as a consistently better alternative. But Donald Trump’s election campaign in 2016 is said to have already used similar methods to keep African-American voters, in particular, from voting for his rival Hillary Clinton.

Today, such data can be purchased from many data brokers. In addition, in the wake of the abolition of advertising cookies, a new class of ID solutions is just becoming established, which give advertisers a broad choice of where they ultimately operate their advertising targeting. This infrastructure can also be used to circumvent the information requirements that are now coming. The largest advertisers already process a lot of customer information themselves and are therefore not very dependent on the platforms’ offerings.

The targeting mechanisms would not have to be disclosed by the platforms for such advertisements because they are unavailable. Facebook and Twitter, for example, already show only very generic categories in the corresponding infoboxes.

The protection of minors is also very vague. In the past, platforms had declared themselves independent of youth protection laws by unceremoniously setting a minimum age of 13 years in their terms and conditions. Or they even marked their offerings as questionable for youth protection programs so that parents were required to allow their children access to offerings such as YouTube. Where to draw the line is ultimately for the executive branch to determine. Outside the platforms, the DSA does not even introduce such an age limit, so no new limits are set for advertising here.

Dark patterns: Ban does not apply to all

This is also where the weaknesses of the compromise reached in Parliament become apparent. The members of parliament had written the ban on personalized advertising for minors into the law against the unanimous advice of experts, as they did not want to adopt a general ban on this form of advertising. The prerequisite for this, however, would have been a precise recording of children by the operators. This obligation has now been explicitly ruled out, so in principle, it could be enough to remove the age categories from the platforms’ advertising tools. How supervisory authorities deal with offerings like TikTok remains to be seen in practice.

The ban on “dark patterns“, on the other hand, is formulated somewhat more concretely. However, it is also intended to apply only to online platforms and not to every company. In addition, the list of prohibited practices has been reduced on the initiative of the Council. Explicitly prohibited, for example, is getting users to make a certain decision by the size or color of a button or asking them again and again if they had already decided against an option.

The Parliament had proposed that the companies should even submit the exact data that had led to certain designs. There is no longer any talk of this – probably also because no regulatory authority could analyze such detailed data in a reasonable amount of time.

This probably has very little impact on the unpopular cookie banners. For one thing, the platforms affected by the regulation rarely display the banners in practice. For another, the General Data Protection Regulation and the ePrivacy Directive continue to be decisive here.

Google showed this week that the rules already in place are not as toothless as feared when the company announced a new cookie banner for European users. Previously, the French data protection authority CNIL had fined the group €150 million. Torsten Kleinz

CAI: Agreement remains on hold despite China’s concession

By

Amelie Richter

China ratified two International Labor Organization (ILO) conventions against forced labor last week. The decision came as a surprise – but in the EU’s view is not enough to revive the investment agreement between the European Union and China (CAI).

From the Directorate General for Trade (DG Trade) comes a clear rejection: At this point in time, there is “no prospect of moving forward with the ratification process of the CAI,” a spokesperson announced. The EU does attach great importance to China’s ratification of the ILO’s core conventions, including those relating to forced labor, and welcomes the move. But as long as Beijing’s sanctions against EU parliamentarians are in place, CAI will not be touched.

The fact that the People’s Republic did not want to ratify the ILO conventions but only to “strive” for progress in this regard was one of the main points of criticism of the investment agreement. The agreement, which was reached under the German Council presidency, has been on ice since the beginning of 2021. The EU initially imposed sanctions on several leading officials and an organization in Xinjiang because of human rights violations against the Uyghurs. Beijing responded with punitive measures against EU parliamentarians, among others.

Experts also do not expect the agreement to be back on the agenda any time soon now. “While ratification of the ILO conventions is a great gesture by Beijing toward Brussels, it does not eliminate the main obstacles to CAI ratification,” says Merics analyst Grzegorz Stec. CAI remains on hold for very different obstacles: mutual sanctions and the trade dispute over Lithuania. “None of these issues is likely to be resolved in the foreseeable future, including in the context of political tensions over Beijing’s alignment with Moscow,” Stec said.

Beijing seems to be in a “damage control mode” toward the EU. The EU-China summit did not go very well and remained without results. The focus of EU-China relations would increasingly shift toward “systemic rivalry”. Improving the relationship with Brussels could be difficult for the leadership in Beijing, Stec explains.

Little real progress

Beijing ratified two time-honored ILO conventions last week after decades of negotiations:

The Forced Labor Convention (C029), 1930
The Abolition of Forced Labor Convention (C105), 1957

However, observers do not expect any actual improvements for local workers. The move was a “diplomatic decision” that will not lead to any significant changes, Aidan Chau of the non-governmental organization China Labour Bulletin told China.Table. The Hong Kong-based organization campaigns for workers’ rights in the People’s Republic. China has also ratified the 1988 Convention on Safety in Construction and the 1981 Convention on Safety and Health at Work, Chau said.

However, that hasn’t changed much, he said: “We continue to observe that occupational accidents on construction sites, such as crane collapses, are common in China.” Major progress on workers’ interests and rights can only come through collective negotiations, Chau said. But independent unions do not exist in China. Other forms of employee organizations are also weak in China.

China to present better track record to Bachelet

The ILO’s ability to verify the enforcement of the conventions in practice is generally limited. China rejects accusations of forced labor – especially in the Xinjiang region. Beijing is unlikely to agree to on-site investigations by independent experts. However, ILO ratification obliges the People’s Republic to report regularly on progress in implementation.

The timing of the ratification is not entirely coincidental. In May, the United Nations High Commissioner for Human Rights, Michelle Bachelet, is scheduled to visit China for the first time – including the Xinjiang region. With the ratification, China now wants to signal that the protection of workers’ rights is taken seriously, Surya Deva, a law professor at Macquarie University in Australia, told the South China Morning Post newspaper. With ratification, China can present a better track record on workers’ rights at the ILO level, Deva said.

According to Deva, however, it is unlikely that the ILO conventions will result in the abolition of forced labor on the ground. Beijing was making the move out of calculation: “to warm its relations with the EU in view of the increasing cleavage with the US over the Russian invasion of Ukraine and to try reviving the CAI.”

Slovenia: election defeat for Jansa

Prime Minister Janez Jansa has suffered a defeat in Slovenia’s parliamentary elections. His right-wing nationalist party SDS, which has been in power until now, received just under 24 percent of the votes cast yesterday after almost all of them had been counted. The 63-year-old, who critics have accused of corruption and an authoritarian style of government, thus has little chance of forming a majority in parliament.

According to the results, the liberal Freedom Movement of energy manager and lateral entrant Robert Golobwon won the election with 34 percent of the vote. It can thus count on 40 of the 90 parliamentary seats. Golob could form a majority with other left-wing parties. A coalition between Jansa’s SDS and the conservative New Slovenia Party (NSi, 7 percent, 9 seats) would not have the necessary seats.

The 55-year-old Golob is thus likely to become the next prime minister. A graduate in electrical engineering, Golob was until recently general director of the state electricity trading company Gen-I, which he had managed since 2006. Jansa arranged for his contract not to be renewed at the end of last year. Golob then took over a small Green Party and reshaped it into the Freedom Movement. Golob had to vote by absentee ballot because he had contracted the coronavirus.

Jansa had attempted to bring the media and judiciary under his control during his time in government. During the election campaign, he used the government’s resources for his SDS party. He often foul-mouthed political opponents and journalists via the short message service Twitter.

Jansa is also a close ally of Hungarian Prime Minister Viktor Orbán. Hungarian businessmen who depend on Orbán have for years financed television stations, newspapers, and internet portals of the SDS party. Under Jansa, the EU country of Slovenia moved closer to the “illiberal” axis formed by the EU-skeptical governments in Budapest and Warsaw.

Jansa came to government in early 2020 as a result of the collapse of the center-left coalition formed in 2018. Deputies from two small parties that were part of this coalition had defected to Jansa. In this way, his right-wing coalition gained a extremely narrow majority in the 90-seat parliament.dpa/tho

Naftogaz warns of gas import collapse

Ukrainian state-owned Naftogaz has warned of a collapse in Russian gas transit through Ukraine. “We estimate that one-third of the gas volume exported from Russia to the EU through Ukraine will be lost if the occupation forces do not stop disrupting the operation of our stations in recently occupied territories,” Naftogaz CEO Yuri Vitrenko wrote on Twitter on Saturday. Naftogaz operates Ukraine’s gas transmission system. According to the company, more than 58 million cubic meters of natural gas were transported from Russia to the West on Friday.

Despite the Russian attack two months ago, Ukraine has not stopped either natural gas or oil transit to the west. Even the brief occupation of large parts of northern Ukraine, including pumping stations on the Russian border, by Russian troops at the beginning of the war did not lead to a decrease. Since the beginning of the war, more than five billion cubic meters of natural gas have been pumped westward through Ukraine’s territory. At the same time, Kyiv is demanding that EU states boycott Russian energy sources to make it more difficult for Russia to finance the war against Ukraine.

EU Commission: gas payments in rubles possible

Meanwhile, the EU Commission announced that companies from the European Union could possibly pay for Russian gas supplies in rubles after all, without violating EU sanctions against Moscow.

Before making the payments, however, they should make a declaration, according to an EU Commission document obtained by the Reuters news agency. According to it, they should consider their contractual obligations fulfilled when they deposit euros or dollars at Gazprombank – and not later, after the payment has been converted into rubles. “It would be advisable to get confirmation from the Russian side that this procedure is possible under the rules of the decree,” the document says.

Moscow has warned Europe that gas supplies could be interrupted if payment is not made in Russian currency in the future. A decree to this effect was issued in March. It proposed that energy buyers open accounts with Russia’s Gazprombank to make payments in euros or dollars, which would then be converted into rubles. The EU sanctions regime does not prohibit companies from opening accounts with Gazprombank or contacting it to find a solution, the Brussels-based authority said. dpa/rtr

ECB: interest rate hike conceivable

European Central Bank policymakers are keen to end their bond purchase scheme at the earliest possible moment and raise interest rates as soon as July, nine sources familiar with ECB thinking told Reuters.

Several central banks, such as the US Federal Reserve (Fed) and the Bank of England, have already begun to raise their interest rates in order to stem the current rise in prices. The ECB has been reluctant to do so so far. However, in recent months, high energy and commodity prices have pushed inflation in the eurozone up to 7.5 percent, the highest inflation rate since the single currency began.

Since 2014, the ECB has bought nearly €5 trillion worth of public and private bonds as part of its “quantitative easing” strategy to support lending and bring inflation to its target of 2 percent a year. rtr/leo

EU-India: new trade and technology council

The EU and India want to cooperate more closely on technology development issues. “We believe that the relationship with India has great potential, and we need to exploit that potential,” a senior EU official said. Commission President Ursula von der Leyen will launch a joint trade and technology council with Prime Minister Narendra Modi during her visit to the Asian country today. The EU already started a similar format with the US last year.

India already cooperates closely with the EU on trade issues but less so on technology issues, the official said. India faces the same challenges as the EU when it comes to 5G, 6G, and cloud computing, for example. There is a need to talk about trustworthy technologies.

India should be helped to become less dependent on Russia for military equipment. The country has broadened its economic base, but not on this issue. So far, it has been difficult for most EU countries to supply military equipment to India because of necessary export licenses. However, there is a determination to open markets. In addition, Russian military equipment, for example, with regard to high-tech components, would be hit hard by EU sanctions.

The Association of German Chambers of Industry and Commerce (DIHK) has high expectations for the visit. “In the current global political situation, it is necessary for the EU to reactivatethe long-stalled talks on a trade agreement with India,” DIHK Chief Executive Martin Wansleben told Deutsche Presse-Agentur. “An EU trade policy based on reliable rules that promotes and stabilizes economic relations with important partners like India is important for the many German companies that operate internationally.” dpa

Vaccine contracts: Green MEPs sue EU Commission

Greens/EFA members Jutta Paulus, Tilly Metz, Margrete Auken, Michèle Rivasi, and Kim van Sparrentak have filed a complaint against the European Commission with the European Court of Justice. They are demanding access to the full contracts for the purchase of Covid 19 vaccines, which so far are only available in redacted versions. “Secrecy is a breeding ground for mistrust and skepticism and has no place in public agreements with pharmaceutical companies,” shared Jutta Paulus. “Purchases made with public money should be accompanied by public information, especially on health issues. We are committed to the public’s right to know.”

In the restricted versions published by the Commission in 2021, all information relating to, among other things, prices, payment and delivery deadlines, production locations, and key information relating to liability and compensation, intellectual property rights, termination clauses, resale and donations had been redacted. The redactions would make it impossible to understand the contracts, MEPs argue. Transparency, on the other hand, creates confidence in the institutions’ ability to implement public health programs.

Already sued in October 2021

“The European Commission’s refusal to be transparent about vaccine contracts undermines public confidence in the EU Commission’s ability to put the health of citizens first in trade agreements with the pharmaceutical industry,” Tilly Metz affirmed.

In October 2021, the five Green MEPs already took the Commission to court once, demanding disclosure of vaccine purchase contracts. In February 2022, the Commission granted partially extended access to the (advance) purchase contracts. However, important passages and information remained redacted. The Commission argued that the redacted portions would fall under the protection of commercial interests.

But that was not enough for the five Green MEPs. They reiterated the demand for access to key information and now filed a new complaint. Among other things, the MEPs demand disclosure of the prices for the vaccine doses, the advance payments, the conditions for donating vaccine doses, and the responsibilities and compensation. ank

Will the Ukraine war upend the sustainability agenda?

Von Gilles Moëc und Bertrand Badré

Bertrand Badré (photo), a former managing director of the World Bank, is CEO and Founder of Blue like an Orange Sustainable Capital. Gilles Moëc is Chief Economist of AXA.

The casualties in Russian President Vladimir Putin’s war against Ukraine extend well beyond the Ukrainians whom Russian forces are directly targeting. Russia’s aggression also threatens the global sustainability agenda, with potentially devastating consequences for the entire planet.

Already, the COVID-19 pandemic redirected global attention and resources away from the targets enshrined in the 2015 Paris climate agreement, as countries focused on their immediate public-health needs. Now, Putin’s war is intensifying the economic, social, and geopolitical pressures countries face, while deepening divisions among them. This does not bode well for efforts to address the shared challenge of climate change.

To improve our chances of salvaging the sustainability agenda, we must recognize the concerns and imperatives raised by the current crisis and adjust our approach accordingly. That means making our approach to environmental, social, and governance (ESG) issues both more holistic and more granular.

Energy policy is more than security

For starters, any discussion of energy policy must now account for both the non-negotiable target of reaching net-zero carbon dioxide emissions by 2050 and the need to deliver energy security and ensure social cohesion. If energy policies focus only on security concerns, they are likely to undermine the sustainability agenda.

European efforts to replace Russian gas with liquefied natural gas (LNG) from the United States or Qatar are a case in point. One might argue that this is merely a “quick fix,” aimed at addressing an urgent problem. But such systems can easily become entrenched – for example, if operators demand long-term commitments from governments – which would undermine efforts to decarbonize power generation.

To be sure, the Ukraine war demands urgent action, which might include quick-fix solutions. But such measures must be carefully integrated into a wider strategy, including both a faster shift toward renewable energy – which, in the European Union, may demand the enlargement of the funding capacity of the Next Generation EU pandemic-recovery package – and a reconsideration of nuclear power.

The EU has yet to finalize its position on nuclear power in its sustainable finance taxonomy, which seeks to guide companies, investors, and policymakers toward climate-friendly activities and investments. But it is worth noting that the net-zero pathway proposed by the International Energy Agency in its World Energy Outlook 2021 calls for an increase in nuclear power’s share of the energy mix.

Fair energy transition more topical than ever

This is not a matter only for policymakers to consider; all investors must take a more holistic approach to energy, one that balances the imperative of shifting away from fossil fuels with countries’ geopolitical constraints. Similarly, investors must improve their capacity to assess environmental and social considerations in tandem.

The idea of a “just climate transition” is not new. But it takes on new salience amid Russia’s war on Ukraine, which has driven up global prices not only of energy, but also of food. In fact, by disrupting food supplies from Russia and Ukraine, the war threatens global food security.

Agriculture and the food industry – energy-intensive sectors that have far-reaching effects on biodiversity – were always going to play a key role in the net-zero transition. But the Ukraine war has shown that any strategy for mitigating these sectors’ environmental impact must also recognize the need to ensure food security, such as through the diversification of supplies.

The need to combine environmental and social considerations applies to firms, but also – and perhaps more importantly – to governments, for which the financial industry has yet to adopt a sufficiently detailed common methodology. The approach that emerges must account for the effectiveness with which governments manage the distributive effects of policies related to the net-zero transition. Without fair burden-sharing, popular support for climate action will deteriorate.

Investing according to ESG criteria more complicated

Another area where ESG strategies will need to become more granular in the wake of the Ukraine war is cryptocurrencies. So far, the focus has been on the environmental impact of crypto “mining,” which is hugely energy-intensive. But the war has highlighted the social and geopolitical dimensions of cryptocurrencies, which Ukraine has used to crowdfund its military, and Russia could use to evade international sanctions.

Finally, investors must take a more nuanced view of the defense industry. It has been customary for ESG investors to exclude such businesses from their portfolios. While there is no reason to start investing in the development and production of controversial weapons, ESG investors might want to reconsider their approach to firms that enhance countries’ capacity to defend themselves against aggression. A more robust set of principles on integrating human rights into investment policies is urgently needed.

In these – and, most likely, many more – ways, the Ukraine war has complicated ESG investing. This could prove disastrous for the sustainability agenda, especially if it is used as an excuse to relegate environmental and social considerations to the back burner. The world’s silence on the latest report from the Intergovernmental Panel on Climate Change shows just how acute this risk has become.

To avoid such an outcome, business and civil society must join forces to chart a way forward. Investors, consumers, workers, and businesses have a shared responsibility to design a new system that fulfills the vision of the Paris climate agreement and includes a more comprehensive approach to ESG assessments.

In cooperation with Project Syndicate, 2022.

EUROPE.TABLE EDITORS

Till
Hoppe

Charlotte
Wirth

Falk
Steiner

Timo
Landenberger

Corinna
Visser

Lukas
Knigge

Eric
Bonse

Sarah
Schaefer

Manuel
Berkel

Lisa-Martina
Klein

Markus
Grabitz

Stephan
Israel

Claire
Stam

Dear reader,

A triumph for Emmanuel Macron: France’s president has prevailed in the runoff election – with a clearer lead than all polling institutes had predicted. The decisive victory should give his LREM party some tailwind for the third round of the elections, namely for the National Assembly on June 12 and 19.

For France’s democracy and for the European idea, however, the election results are another warning signal: The political fringes are stronger than ever, and the “Republican Front” is crumbling. Macron has contributed to the fact that the other center parties are only shadows of their former selves. As a result, dissatisfied voters basically have no choice but to vote for extreme parties or not to vote at all. Consequently, the number of non-voters has risen to record levels.

For now, however, the liberal, pro-European forces have won – in France as well as in Slovenia. There, the would-be authoritarian Prime Minister Janez Jansa, who sometimes mocks critics on Twitter, suffered a defeat. He was defeated by a lateral candidate, the former energy manager Robert Golob.

Shortly before the election, the French Council Presidency achieved a success: On Saturday night, the Council and the European Parliament agreed on the Digital Services Act. The legislation updates the 20-year-old basic rules for the digital economy. However, the specifications for online advertising that have now been agreed on contain considerable loopholes, as Torsten Kleinz analyzes.

I wish you a good start to the week.

Your
Till Hoppe

Macron’s election victory: triumph and warning signal

The last polling stations had just closed, and the forecasts TV channels predicted a clear victory for Emmanuel Macron, when the first well-wishers had already come forward. “I look forward to continuing our excellent cooperation,” tweeted Commission President Ursula von der Leyen. German Chancellor Olaf Scholz congratulated Macron by telephone shortly afterwards, saying the French voters’ decision also meant “a clear commitment to Europe and the European unification process”. Dutch Prime Minister Mark Rutte, Lithuanian President Gitanas Nauseda, and Canadian Prime Minister Justin Trudeau also hastened to convey their congratulations.

There is great relief among EU and NATO partners that they can continue to work with Macron in the future and not with his rival, Marine Le Pen. “The French have just averted a historic declaration of bankruptcy for Europe,” European Parliament Vice President Nicola Beer (FDP) told Europe.Table. Le Pen had threatened a xenophobic Grande Nation hostile to the EU.

At 59 percent, Macron’s election victory was clearer than had been expected two weeks ago, after the first round of voting. Many voters for the third-placed leftist Jean-Luc Mélenchon decided to vote for the incumbent after all in view of the alternative. Macron thanked them during his appearance near the Eiffel Tower, visibly moved. Macron said he knew that not all voters had voted for him out of conviction and that this would commit him for the next five years.

The election shows “how deeply divided the country is, how deep the frustration of many French people is,” said Jens Geier, head of the SPD group in the European Parliament. Macron must therefore do more for social justice. Not only did far more voters vote for Le Pen than in the runoff election five years ago (33.9 percent) – the leader of the far-right Rassemblement National (RN) herself, therefore, sold her defeat as a “resplendent victory”. Moreover, voter turnout was historically low at 71.8 percent.

‘Political spring looks different’

“A political springtime of the 5th Republic looks different,” says Nicola Beer: “Emmanuel Macron is facing a politically deeply divided country at a time when historic strength is expected from Europe – which must stand united and with full force against the war in Europe. How strongly the president can fulfill this role now depends above all on the outcome of the parliamentary elections in June.

Both Le Pen’s RN and Mélenchon’s “La France Insoumise” believe they have a chance of securing a majority in the National Assembly. A so-called cohabitation would mean a protracted government formation, Beer warns. “For Europe, a France that is preoccupied with itself for months would be a bitter damper on its ability to act.”

However, Macron’s unexpectedly clear victory in the runoff is likely to give his LREM party some tailwind. Marine Le Pen has again failed to enter the Élysée Palace at the third attempt. All efforts to normalize her party have not been enough.

In the televised duel against Macron, she had appeared almost defensive. Macron repeatedly pointed out that Le Pen’s new strategy is only packaging. Underneath it was still the far-right, which wanted to harm Europe, scare off immigrants and think nationalistically. Thus, he repeatedly stressed in recent days, “The election is also a referendum on Europe.” Last night he announced that his first trip abroad would take him to Berlin.

Still the president of the rich

That Le Pen almost made it, however, that is also Macron’s fault. He has mastered France’s crises and is appreciated by many for it; he is also regarded as a reformer who has revived the French economy.

However, there are also many French people who criticize him and even despise him. He is still the “president of the rich”, the privileged elite, his constituency. He has lost this reputation since he abolished the wealth tax and converted it into a tax on real estate ownership.

The poorer French are angry with him. They are angry about being left behind. Every decision that limits their purchasing power confirms their attitude toward Macron. A planned fuel price increase, for example, led to the protest of the yellow vests. But many young people are also disappointed in him because he is not socially-minded enough and, in their opinion, not committed enough to climate protection.

Le Pen, on the other hand, scored points with her closeness to the people. That she did not make it, after all, the reason also lies in an anti-Le Pen front that formed a few days before the runoff. Media reports piled up at home and abroad about how France and Europe could suffer if Le Pen came to power. Economists described the country’s economic decline.

On Facebook, many French people called against a vote for Le Pen. Parents tried to influence their children not to abstain from voting and to vote for Macron and Europe. There were protests against right-wing populism all over the country, but that does not mean support for Macron. The slogan was, “Better a vote that stinks than a vote that kills.”

All eyes were on Jean-Luc Mélenchon’s voters in the first round of voting. Many of them are young, well-educated people. Many said after the election that they didn’t want to vote, they then changed their minds. Better Macron than Le Pen. According to voter surveys, about 40 percent of Mélenchon voters ultimately voted for Macron, 17 percent for Le Pen. Tanja Kuchenbecker and Till Hoppe

DSA: advertising regulation with loopholes

The marathon negotiations were followed by superlatives: Commission President Ursula von der Leyen called the agreement reached on Saturday night on the Digital Services Act “historic”, while the European Parliament’s rapporteur, Christel Schaldemose (S&D), spoke of a new “global gold standard”. German Justice Minister Marco Buschmann praised that “the way is now clear for uniform requirements for social networks and other online platforms in Europe”.

At least the rules for online advertising are less strict than many in the European Parliament had hoped. The response has been correspondingly positive: The digital association BVDW sees “a lot of light”, but also fears shadows; MEP Patrick Breyer (Pirate Party) complained that “industry and government interests” had prevailed over digital civil rights.

In Parliament, the Social Democrats, the Greens, and the Left had originally called for a complete ban on “surveillance advertising“, but were already unable to get their way internally. Instead, in the trilogue, the Parliament demanded a ban on the evaluation of personal data of minors for advertising purposes, extended information obligations, and a ban on misleading designs, so-called dark patterns.

These demands are now reflected in the final result of the negotiations. Martin Schirdewan, the rapporteur for the Left Party, spoke afterwards of a “great success for the protection of users, even if a complete ban on personalized advertising would be desirable”.

However, the nightly compromise has significant gaps in Articles 23 and 24 of the DSA, available to Europe.Table in its final version. For instance, it ignores the distributed nature of today’s advertising business. True, online platforms are no longer supposed to play ads based on certain categories, such as sexual orientation or health data. But that doesn’t stop middlemen from doing this targeting outside the platforms. Instead of targeting people with diabetes, for example, they can target users who have subscribed to a diabetes support group.

Gaps for targeting

Personalized advertising would thus become contextual advertising, which opponents of today’s advertising business see as a consistently better alternative. But Donald Trump’s election campaign in 2016 is said to have already used similar methods to keep African-American voters, in particular, from voting for his rival Hillary Clinton.

Today, such data can be purchased from many data brokers. In addition, in the wake of the abolition of advertising cookies, a new class of ID solutions is just becoming established, which give advertisers a broad choice of where they ultimately operate their advertising targeting. This infrastructure can also be used to circumvent the information requirements that are now coming. The largest advertisers already process a lot of customer information themselves and are therefore not very dependent on the platforms’ offerings.

The targeting mechanisms would not have to be disclosed by the platforms for such advertisements because they are unavailable. Facebook and Twitter, for example, already show only very generic categories in the corresponding infoboxes.

The protection of minors is also very vague. In the past, platforms had declared themselves independent of youth protection laws by unceremoniously setting a minimum age of 13 years in their terms and conditions. Or they even marked their offerings as questionable for youth protection programs so that parents were required to allow their children access to offerings such as YouTube. Where to draw the line is ultimately for the executive branch to determine. Outside the platforms, the DSA does not even introduce such an age limit, so no new limits are set for advertising here.

Dark patterns: Ban does not apply to all

This is also where the weaknesses of the compromise reached in Parliament become apparent. The members of parliament had written the ban on personalized advertising for minors into the law against the unanimous advice of experts, as they did not want to adopt a general ban on this form of advertising. The prerequisite for this, however, would have been a precise recording of children by the operators. This obligation has now been explicitly ruled out, so in principle, it could be enough to remove the age categories from the platforms’ advertising tools. How supervisory authorities deal with offerings like TikTok remains to be seen in practice.

The ban on “dark patterns“, on the other hand, is formulated somewhat more concretely. However, it is also intended to apply only to online platforms and not to every company. In addition, the list of prohibited practices has been reduced on the initiative of the Council. Explicitly prohibited, for example, is getting users to make a certain decision by the size or color of a button or asking them again and again if they had already decided against an option.

The Parliament had proposed that the companies should even submit the exact data that had led to certain designs. There is no longer any talk of this – probably also because no regulatory authority could analyze such detailed data in a reasonable amount of time.

This probably has very little impact on the unpopular cookie banners. For one thing, the platforms affected by the regulation rarely display the banners in practice. For another, the General Data Protection Regulation and the ePrivacy Directive continue to be decisive here.

Google showed this week that the rules already in place are not as toothless as feared when the company announced a new cookie banner for European users. Previously, the French data protection authority CNIL had fined the group €150 million. Torsten Kleinz

CAI: Agreement remains on hold despite China’s concession

By

Amelie Richter

China ratified two International Labor Organization (ILO) conventions against forced labor last week. The decision came as a surprise – but in the EU’s view is not enough to revive the investment agreement between the European Union and China (CAI).

From the Directorate General for Trade (DG Trade) comes a clear rejection: At this point in time, there is “no prospect of moving forward with the ratification process of the CAI,” a spokesperson announced. The EU does attach great importance to China’s ratification of the ILO’s core conventions, including those relating to forced labor, and welcomes the move. But as long as Beijing’s sanctions against EU parliamentarians are in place, CAI will not be touched.

The fact that the People’s Republic did not want to ratify the ILO conventions but only to “strive” for progress in this regard was one of the main points of criticism of the investment agreement. The agreement, which was reached under the German Council presidency, has been on ice since the beginning of 2021. The EU initially imposed sanctions on several leading officials and an organization in Xinjiang because of human rights violations against the Uyghurs. Beijing responded with punitive measures against EU parliamentarians, among others.

Experts also do not expect the agreement to be back on the agenda any time soon now. “While ratification of the ILO conventions is a great gesture by Beijing toward Brussels, it does not eliminate the main obstacles to CAI ratification,” says Merics analyst Grzegorz Stec. CAI remains on hold for very different obstacles: mutual sanctions and the trade dispute over Lithuania. “None of these issues is likely to be resolved in the foreseeable future, including in the context of political tensions over Beijing’s alignment with Moscow,” Stec said.

Beijing seems to be in a “damage control mode” toward the EU. The EU-China summit did not go very well and remained without results. The focus of EU-China relations would increasingly shift toward “systemic rivalry”. Improving the relationship with Brussels could be difficult for the leadership in Beijing, Stec explains.

Little real progress

Beijing ratified two time-honored ILO conventions last week after decades of negotiations:

The Forced Labor Convention (C029), 1930
The Abolition of Forced Labor Convention (C105), 1957

However, observers do not expect any actual improvements for local workers. The move was a “diplomatic decision” that will not lead to any significant changes, Aidan Chau of the non-governmental organization China Labour Bulletin told China.Table. The Hong Kong-based organization campaigns for workers’ rights in the People’s Republic. China has also ratified the 1988 Convention on Safety in Construction and the 1981 Convention on Safety and Health at Work, Chau said.

However, that hasn’t changed much, he said: “We continue to observe that occupational accidents on construction sites, such as crane collapses, are common in China.” Major progress on workers’ interests and rights can only come through collective negotiations, Chau said. But independent unions do not exist in China. Other forms of employee organizations are also weak in China.

China to present better track record to Bachelet

The ILO’s ability to verify the enforcement of the conventions in practice is generally limited. China rejects accusations of forced labor – especially in the Xinjiang region. Beijing is unlikely to agree to on-site investigations by independent experts. However, ILO ratification obliges the People’s Republic to report regularly on progress in implementation.

The timing of the ratification is not entirely coincidental. In May, the United Nations High Commissioner for Human Rights, Michelle Bachelet, is scheduled to visit China for the first time – including the Xinjiang region. With the ratification, China now wants to signal that the protection of workers’ rights is taken seriously, Surya Deva, a law professor at Macquarie University in Australia, told the South China Morning Post newspaper. With ratification, China can present a better track record on workers’ rights at the ILO level, Deva said.

According to Deva, however, it is unlikely that the ILO conventions will result in the abolition of forced labor on the ground. Beijing was making the move out of calculation: “to warm its relations with the EU in view of the increasing cleavage with the US over the Russian invasion of Ukraine and to try reviving the CAI.”

Slovenia: election defeat for Jansa

Prime Minister Janez Jansa has suffered a defeat in Slovenia’s parliamentary elections. His right-wing nationalist party SDS, which has been in power until now, received just under 24 percent of the votes cast yesterday after almost all of them had been counted. The 63-year-old, who critics have accused of corruption and an authoritarian style of government, thus has little chance of forming a majority in parliament.

According to the results, the liberal Freedom Movement of energy manager and lateral entrant Robert Golobwon won the election with 34 percent of the vote. It can thus count on 40 of the 90 parliamentary seats. Golob could form a majority with other left-wing parties. A coalition between Jansa’s SDS and the conservative New Slovenia Party (NSi, 7 percent, 9 seats) would not have the necessary seats.

The 55-year-old Golob is thus likely to become the next prime minister. A graduate in electrical engineering, Golob was until recently general director of the state electricity trading company Gen-I, which he had managed since 2006. Jansa arranged for his contract not to be renewed at the end of last year. Golob then took over a small Green Party and reshaped it into the Freedom Movement. Golob had to vote by absentee ballot because he had contracted the coronavirus.

Jansa had attempted to bring the media and judiciary under his control during his time in government. During the election campaign, he used the government’s resources for his SDS party. He often foul-mouthed political opponents and journalists via the short message service Twitter.

Jansa is also a close ally of Hungarian Prime Minister Viktor Orbán. Hungarian businessmen who depend on Orbán have for years financed television stations, newspapers, and internet portals of the SDS party. Under Jansa, the EU country of Slovenia moved closer to the “illiberal” axis formed by the EU-skeptical governments in Budapest and Warsaw.

Jansa came to government in early 2020 as a result of the collapse of the center-left coalition formed in 2018. Deputies from two small parties that were part of this coalition had defected to Jansa. In this way, his right-wing coalition gained a extremely narrow majority in the 90-seat parliament.dpa/tho

Naftogaz warns of gas import collapse

Ukrainian state-owned Naftogaz has warned of a collapse in Russian gas transit through Ukraine. “We estimate that one-third of the gas volume exported from Russia to the EU through Ukraine will be lost if the occupation forces do not stop disrupting the operation of our stations in recently occupied territories,” Naftogaz CEO Yuri Vitrenko wrote on Twitter on Saturday. Naftogaz operates Ukraine’s gas transmission system. According to the company, more than 58 million cubic meters of natural gas were transported from Russia to the West on Friday.

Despite the Russian attack two months ago, Ukraine has not stopped either natural gas or oil transit to the west. Even the brief occupation of large parts of northern Ukraine, including pumping stations on the Russian border, by Russian troops at the beginning of the war did not lead to a decrease. Since the beginning of the war, more than five billion cubic meters of natural gas have been pumped westward through Ukraine’s territory. At the same time, Kyiv is demanding that EU states boycott Russian energy sources to make it more difficult for Russia to finance the war against Ukraine.

EU Commission: gas payments in rubles possible

Meanwhile, the EU Commission announced that companies from the European Union could possibly pay for Russian gas supplies in rubles after all, without violating EU sanctions against Moscow.

Before making the payments, however, they should make a declaration, according to an EU Commission document obtained by the Reuters news agency. According to it, they should consider their contractual obligations fulfilled when they deposit euros or dollars at Gazprombank – and not later, after the payment has been converted into rubles. “It would be advisable to get confirmation from the Russian side that this procedure is possible under the rules of the decree,” the document says.

Moscow has warned Europe that gas supplies could be interrupted if payment is not made in Russian currency in the future. A decree to this effect was issued in March. It proposed that energy buyers open accounts with Russia’s Gazprombank to make payments in euros or dollars, which would then be converted into rubles. The EU sanctions regime does not prohibit companies from opening accounts with Gazprombank or contacting it to find a solution, the Brussels-based authority said. dpa/rtr

ECB: interest rate hike conceivable

European Central Bank policymakers are keen to end their bond purchase scheme at the earliest possible moment and raise interest rates as soon as July, nine sources familiar with ECB thinking told Reuters.

Several central banks, such as the US Federal Reserve (Fed) and the Bank of England, have already begun to raise their interest rates in order to stem the current rise in prices. The ECB has been reluctant to do so so far. However, in recent months, high energy and commodity prices have pushed inflation in the eurozone up to 7.5 percent, the highest inflation rate since the single currency began.

Since 2014, the ECB has bought nearly €5 trillion worth of public and private bonds as part of its “quantitative easing” strategy to support lending and bring inflation to its target of 2 percent a year. rtr/leo

EU-India: new trade and technology council

The EU and India want to cooperate more closely on technology development issues. “We believe that the relationship with India has great potential, and we need to exploit that potential,” a senior EU official said. Commission President Ursula von der Leyen will launch a joint trade and technology council with Prime Minister Narendra Modi during her visit to the Asian country today. The EU already started a similar format with the US last year.

India already cooperates closely with the EU on trade issues but less so on technology issues, the official said. India faces the same challenges as the EU when it comes to 5G, 6G, and cloud computing, for example. There is a need to talk about trustworthy technologies.

India should be helped to become less dependent on Russia for military equipment. The country has broadened its economic base, but not on this issue. So far, it has been difficult for most EU countries to supply military equipment to India because of necessary export licenses. However, there is a determination to open markets. In addition, Russian military equipment, for example, with regard to high-tech components, would be hit hard by EU sanctions.

The Association of German Chambers of Industry and Commerce (DIHK) has high expectations for the visit. “In the current global political situation, it is necessary for the EU to reactivatethe long-stalled talks on a trade agreement with India,” DIHK Chief Executive Martin Wansleben told Deutsche Presse-Agentur. “An EU trade policy based on reliable rules that promotes and stabilizes economic relations with important partners like India is important for the many German companies that operate internationally.” dpa

Vaccine contracts: Green MEPs sue EU Commission

Greens/EFA members Jutta Paulus, Tilly Metz, Margrete Auken, Michèle Rivasi, and Kim van Sparrentak have filed a complaint against the European Commission with the European Court of Justice. They are demanding access to the full contracts for the purchase of Covid 19 vaccines, which so far are only available in redacted versions. “Secrecy is a breeding ground for mistrust and skepticism and has no place in public agreements with pharmaceutical companies,” shared Jutta Paulus. “Purchases made with public money should be accompanied by public information, especially on health issues. We are committed to the public’s right to know.”

In the restricted versions published by the Commission in 2021, all information relating to, among other things, prices, payment and delivery deadlines, production locations, and key information relating to liability and compensation, intellectual property rights, termination clauses, resale and donations had been redacted. The redactions would make it impossible to understand the contracts, MEPs argue. Transparency, on the other hand, creates confidence in the institutions’ ability to implement public health programs.

Already sued in October 2021

“The European Commission’s refusal to be transparent about vaccine contracts undermines public confidence in the EU Commission’s ability to put the health of citizens first in trade agreements with the pharmaceutical industry,” Tilly Metz affirmed.

In October 2021, the five Green MEPs already took the Commission to court once, demanding disclosure of vaccine purchase contracts. In February 2022, the Commission granted partially extended access to the (advance) purchase contracts. However, important passages and information remained redacted. The Commission argued that the redacted portions would fall under the protection of commercial interests.

But that was not enough for the five Green MEPs. They reiterated the demand for access to key information and now filed a new complaint. Among other things, the MEPs demand disclosure of the prices for the vaccine doses, the advance payments, the conditions for donating vaccine doses, and the responsibilities and compensation. ank

Will the Ukraine war upend the sustainability agenda?

Von Gilles Moëc und Bertrand Badré

The casualties in Russian President Vladimir Putin’s war against Ukraine extend well beyond the Ukrainians whom Russian forces are directly targeting. Russia’s aggression also threatens the global sustainability agenda, with potentially devastating consequences for the entire planet.

Already, the COVID-19 pandemic redirected global attention and resources away from the targets enshrined in the 2015 Paris climate agreement, as countries focused on their immediate public-health needs. Now, Putin’s war is intensifying the economic, social, and geopolitical pressures countries face, while deepening divisions among them. This does not bode well for efforts to address the shared challenge of climate change.

To improve our chances of salvaging the sustainability agenda, we must recognize the concerns and imperatives raised by the current crisis and adjust our approach accordingly. That means making our approach to environmental, social, and governance (ESG) issues both more holistic and more granular.

Energy policy is more than security

For starters, any discussion of energy policy must now account for both the non-negotiable target of reaching net-zero carbon dioxide emissions by 2050 and the need to deliver energy security and ensure social cohesion. If energy policies focus only on security concerns, they are likely to undermine the sustainability agenda.

European efforts to replace Russian gas with liquefied natural gas (LNG) from the United States or Qatar are a case in point. One might argue that this is merely a “quick fix,” aimed at addressing an urgent problem. But such systems can easily become entrenched – for example, if operators demand long-term commitments from governments – which would undermine efforts to decarbonize power generation.

To be sure, the Ukraine war demands urgent action, which might include quick-fix solutions. But such measures must be carefully integrated into a wider strategy, including both a faster shift toward renewable energy – which, in the European Union, may demand the enlargement of the funding capacity of the Next Generation EU pandemic-recovery package – and a reconsideration of nuclear power.

The EU has yet to finalize its position on nuclear power in its sustainable finance taxonomy, which seeks to guide companies, investors, and policymakers toward climate-friendly activities and investments. But it is worth noting that the net-zero pathway proposed by the International Energy Agency in its World Energy Outlook 2021 calls for an increase in nuclear power’s share of the energy mix.

Fair energy transition more topical than ever

This is not a matter only for policymakers to consider; all investors must take a more holistic approach to energy, one that balances the imperative of shifting away from fossil fuels with countries’ geopolitical constraints. Similarly, investors must improve their capacity to assess environmental and social considerations in tandem.

The idea of a “just climate transition” is not new. But it takes on new salience amid Russia’s war on Ukraine, which has driven up global prices not only of energy, but also of food. In fact, by disrupting food supplies from Russia and Ukraine, the war threatens global food security.

Agriculture and the food industry – energy-intensive sectors that have far-reaching effects on biodiversity – were always going to play a key role in the net-zero transition. But the Ukraine war has shown that any strategy for mitigating these sectors’ environmental impact must also recognize the need to ensure food security, such as through the diversification of supplies.

The need to combine environmental and social considerations applies to firms, but also – and perhaps more importantly – to governments, for which the financial industry has yet to adopt a sufficiently detailed common methodology. The approach that emerges must account for the effectiveness with which governments manage the distributive effects of policies related to the net-zero transition. Without fair burden-sharing, popular support for climate action will deteriorate.

Investing according to ESG criteria more complicated

Another area where ESG strategies will need to become more granular in the wake of the Ukraine war is cryptocurrencies. So far, the focus has been on the environmental impact of crypto “mining,” which is hugely energy-intensive. But the war has highlighted the social and geopolitical dimensions of cryptocurrencies, which Ukraine has used to crowdfund its military, and Russia could use to evade international sanctions.

Finally, investors must take a more nuanced view of the defense industry. It has been customary for ESG investors to exclude such businesses from their portfolios. While there is no reason to start investing in the development and production of controversial weapons, ESG investors might want to reconsider their approach to firms that enhance countries’ capacity to defend themselves against aggression. A more robust set of principles on integrating human rights into investment policies is urgently needed.

In these – and, most likely, many more – ways, the Ukraine war has complicated ESG investing. This could prove disastrous for the sustainability agenda, especially if it is used as an excuse to relegate environmental and social considerations to the back burner. The world’s silence on the latest report from the Intergovernmental Panel on Climate Change shows just how acute this risk has become.

To avoid such an outcome, business and civil society must join forces to chart a way forward. Investors, consumers, workers, and businesses have a shared responsibility to design a new system that fulfills the vision of the Paris climate agreement and includes a more comprehensive approach to ESG assessments.

In cooperation with Project Syndicate, 2022.