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September 2020

Responsible Capitalism:
An Opportunity For Europe

<p><strong>Responsible Capitalism:</strong><br />
An Opportunity For Europe</p>

The opinions expressed in this report are not necessarily those of the following individuals or the institutions to which they belong.

Chairs of the taskforce

  • Yves Perrier, CEO, Amundi
  • Jean-Dominique Senard, Chairman of the Board of Directors, Renault

Taskforce members

  • Jean-Jacques Barbéris, Member of the Executive Committee, Amundi
  • Francesco Bellino, Managing Director & Partner, The Boston Consulting Group
  • Sophie Burel, Public Affairs Director, Renault
  • Juliette Le Gelard, Principal, The Boston Consulting Group
  • Eric Sauvage, Consultant, Institut Montaigne


  • François-Xavier Albouy, Research Director of the Chair "Demographic Transitions, Economic Transitions", Fondation du Risque
  • Christian Nouel, Partner, Gide Loyrette Nouel, and Chairman, Fondation Croissance Responsable
  • Stanislas Pottier, Chief Responsible Investment Officer, Amundi

Taskforce coordinators

  • Clémence Alméras, Policy Officer, Institut Montaigne
  • François Ewald, Delegate general, Comité Médicis

As well as:

  • Victor Bus, Policy Officer Assistant, Institut Montaigne
  • Alban Petit, Policy Officer Assistant, Institut Montaigne

The opinions expressed in this report are not necessarily those of the following individuals or the institutions to which they belong.

  • Naïm Abou-Jaoudé, CEO, Candriam
  • Loïc Allanos, CSR Deputy Director, Servier
  • Christine Anglade Pirzadeh, Director of Sustainable Development and Communication, Executive Board Advisor, Wendel
  • Morgane Augé, VP Public Affairs France, Orano
  • Jean-Luc Barlet, Partner, Mazars
  • Matthieu Belloir, CSR Director, Orange
  • Annie Bellot-Gurlet, Chief Operating Officer France, IBM
  • Marguerite Bérard, Head of French Retail Banking, BNP Paribas
  • Jean Boissinot, Governor's Adviser, Banque de France
  • Pierre Bollon, General Representative, Association Française de la Gestion financière
  • Ginette Borduas, Head of ESG and Sustainability, Meridiam
  • Céline Boyer-Chammard, Partner and Managing Director, The Boston Consulting Group
  • MaylisBrandou, Director of Strategy and Development, Equanity
  • JérômeBrouillet, Direction générale du Trésor (French Treasury)
  • NicolasCalcoen, Head of Finance, Strategy and Public Affairs, Member of the Executive Board, Amundi
  • FrançoisCalonne, Senior Advisor, International Affairs, Caisse des Dépôts
  • EricCampos, CSR Director, Crédit Agricole SA
  • Anne-Laure Calvez, Corporate Commitment Director, Orano
  • Gwendoline Cazenave, former Director of TGV Atlantique, SNCF Mobilités and Partner, Oliver Wyman
  • Éric Chaney, Economic Advisor, Institut Montaigne
  • Héléna Charrier, Deputy - Group Sustainability, Caisse des Dépôts
  • Antoine Colas, General Secretary and Head of Autonomous Transportation Systems, Transdev
  • Patrick de Cambourg, Chairman of the board of Directors, Autorité des normes comptables (Accounting Standards Authority)
  • Maxime de Couëssin, Director, Réseau Entreprendre Paris
  • Julie de La Sablière, Founder and CEO, Little Wing
  • Caroline de la Marnière, Chairman and Founder, Institut du Capitalisme responsable (Institute of Responsible Capitalism)
  • Antoine de Saint-Affrique, Chief Executive Officer, Barry Callebaut
  • Pierre de Villiers, Senior Advisor, Boston Consulting Group, former Chief of Staff of the French Army
  • Isabelle Diversy, Sustainability manager, Engie
  • Louis Douady, Global Head of CSR, Natixis
  • Blaise Duault, COO, FnB Private Equity
  • Benjamin Fremaux, CEOl, Idex
  • Sylvestre Frezal, Cofounder and Chairman of the Board, Appenin, Covéa Group
  • Christian Gollier, Managing Director, Toulouse School of Economics
  • Vincent Harel, Chairman of the Board of Directors France, Mercer
  • Béatrice Jung, CSR Director, Transdev
  • Augustin Landier, Professor of Finance, HEC
  • Thomas-Olivier Léautier, Chief Economist, EDF
  • Laëtitia Mahenc, Head of the Environment and CSR Department, Teréga
  • Hélène Mairesse, Public Relations Manager, Renault
  • Caroline de la Marnière, Chairman and Founder, Institut du Capitalisme responsable (Institute of Responsible Capitalism)
  • Philippe Martin, Professor of Economics, Sciences Po and Deputy Chairman, Conseil d’analyse économique (Economic Analysis Council)
  • Christine Naoumoff, CSR Strategy Project Manager, Renault
  • Charles Nicolas, Cofounder, Decade for Change
  • Christian Nouel, Partner, Gide Loyrette Nouel, and Chairman, Fondation Croissance Responsable
  • Fanny Picard, Founder and CEO, Alter Equity
  • Bruno Roche, Chief Economist, Mars Incorporated, Founder & Executive Director, Economics of Mutuality
  • Céline Soubranne, Group Chief Corporate Responsibility Officer, AXA
  • Isabelle Spiegel, Director of Environment, Vinci
  • Denis Thaeder, Chief Mission Officer, La Parisienne Assurances
  • Hélène Valade, Chairman of the Board, Observatoire de la Responsabilité Sociétale des Entreprises (Corporate Social Responsibility Observatory) and Director of Environmental Development, LVMH Group
  • Sylvain Vanston, Group Head of Climate and Environment, Groupe AXA
  • Gilles Vermot Desroches, Sustainability Senior VP, Schneider Electric
  • Armelle Weisman, Chairman, Réseau Entreprendre Paris

Climate change and social inequality: these are without a doubt Europe’s two major challenges today. We know that they are urgent. We also know that capitalism as we know it, and as it has prevailed since the 1980s, has not tried to resolve them, quite the opposite. Finding solutions to our major challenges requires questioning the current economic model, and shifting towards a responsible form of capitalism. Facing crises such as Covid-19, fighting climate change, reducing social inequalities - these are the main drivers that should push Europe’s economic strategy.

Europe has the potential to reinvent capitalism and to mobilize the actors that operate within it, in a way that can ensure a safe and sustainable future for all. Corporations and decision makers can no longer shy away from the capacity they have to generate change through the business world. A new model of capitalism that thrives on value-creation for all its shareholders is possible.

By offering to facilitate the development of a responsible form of capitalism, together with the French think tank Comité Medicis, we are seeking to provide a concrete path towards this direction. Various forms of this model already exist in Europe, such as cooperatives and foundations. However they often face regulatory and financial obstacles. Europe must be able to keep thriving economically in a way that is sustainable and that aligns with its core values, all while ensuring its place within globalization.

What will it take to make capitalism responsible?

Responsible Capitalism: An Opportunity For Europe - Infographic

How can responsible capitalism be applied at the European level?

Our aim is to focus on the needs of companies, and to understand what framework changes are needed to facilitate their transformation. Financial mechanisms are the key drivers of such a project. The question we want to ask is how can we create an institutional and regulatory environment that makes it possible for companies to be sustainable? This project should revolve around three axes.

1. Favouring long-term investment in Europe

It is of utmost importance to value investments whose profitability stretches over decades, rather than the short term, in order to allow for sustainable growth. There are multiple investment needs in Europe that have not been met since the 2008 crisis, who could particularly benefit from long-term investment. Such needs lie in spatial planning, health, education, energy, transport, and environmental management.

So far, investment funds in Europe are all adapted to the short-term. How?

  • Savings from households are largely invested in government bonds, as a way to repay government debt.
  • Current prudential rules require banks and insurance companies to hold a minimum level of equity according to the loans they grant. This keeps them from investing household savings into companies.
  • Those who save have the tendency to invest in liquid assets, despite their low profitability, which reflects impatience and fear of potential job or social insecurity.

Added to this is the fact that European financial markets are currently weak. European companies are vulnerable to foreign investment, which has no interest in their strategic visions. A new financial architecture is possible, one that breaks away from the short-term vision of capitalism once and for all.

2. Regaining control over information

Information, the driving force behind market operations, is at the heart of capitalism. Information can be financial, when it indicates the degree of profitability of a company, or extra-financial, when it indicates other variables that can affect business performance, such as ethics.

This information needs to then be translated into monetary value. This becomes possible thanks to a regulator who can standardize the conventions through which this process happens, therefore making this information trustworthy for actors and stakeholders. Without this process of standardization, the financial or extra-financial information of companies would be almost impossible to compare.

Accounting information is regulated on the basis of standards imposed by the United States, and extra-financial ratings are in the hands of American agencies. European capitalism, therefore, needs a framework of standards proper to Europe.

3. Designing a European legal framework to support and protect European businesses and long-term shareholding

A shift is also needed in corporate law, to allow Europe to demonstrate how it can lead a purpose-driven economic system. On May 22 2019, France passed the Business Growth and Transformation PACTE law, with the aim of facilitating the transformation of companies. This law has pushed French corporations to define their social and environmental objectives, as well as their raison d’être, or the purpose that we advocate for. This initiative serves as a clear illustration of the legal framework thatEurope should put in place in order to accompany European firms in their transformation according to the tenets of responsible capitalism.

17 Recommendations to make responsible capitalism possible in Europe

To finance responsible growth in Europe, we must allocate European financial resources to long-term investments.

Using primarily the savings of European households and companies to finance responsible European companies, by exploiting the coincidence of the environmental and social transitions.

Investigating the creation of a European pension fund, collecting a portion of household savings and complementing national pension funding solutions. Such a mechanism would allow for Europe to adopt a unified approach to resolving issues of old age. This sovereign fund would be invested in the long-term in responsible companies, with governance rules inspired by German and Swedish funds (joint or mutualist management, priority given to responsible investment, civil society representatives).

Taking into account the lessons of the 2020 crisis, adapting the prudential rules applicable to financial activities (Solvency 2, Basel III) to encourage long-term investment in responsible capitalism.

Developing the Capital Markets Union for investment in responsible companies at European level and, within this framework, harmonizing the tax rules applicable to the various investment instruments in Europe to determine a European flat tax on financial assets and harmonized bankruptcy laws as quickly as possible. This would also call for transposing the "Restructuring and Insolvency" directive as uniformly as possible in each of the Member States.

Creating private equity investment instruments that can channel financial savings from a region toward companies in that same region, in order to develop local employment.

Increasing employee participation in company ownership, by coordinating profit-sharing and incentive schemes. This recommendation was already put forth in Institut Montaigne’s report: ETI: taille intermédiaire, gros potentiel (in French only), published in January 2018.

Defining the terms of a social taxonomy to complement the ecological taxonomy, taking into account health and social concerns.

Taking back control over the principles that govern European accounting standards within IASB and re-defining a European accounting framework.

Revising the 2014 extra-financial reporting directive, which requires large companies to publish reports on the environmental and social impact of their activities, to define the brand of European responsible capitalism.

Identifying the essential themes of ESG criteria (environmental, social and governance indicators) that correspond to the fundamental values of the EU, before selecting the indicators. I.e: solidarity, individual freedom, regional and cultural diversity, role of unions, etc.

Making ESG requirements based on a green and social taxonomy a condition for all national or European financial aid.

Reforming the EFRAG (European Financial Reporting Advisory Group, created in 2001 to provide a European voice in the development of international accounting standards and to advise the European Commission on the adoption and implementation of those standards) in order to incorporate a European vision of ESG, in line with the challenges and values of the European Union.

Drawing up a code of conduct for extra-financial rating agencies. A similar approach should be applied to proxy voting agencies

Stipulating that a European company must be managed according to its corporate interest in consideration of the social and environmental issues related to its activities, and encouraging all European companies to adopt a "purpose", a key element of their image in society and of the definition of their commitment to common good.

Enabling responsible European companies to have long-term European shareholdings. This brings us back to the mobilization of European savings and therefore shareholders that believe in the European values and influence management on the basis of common values.

Establishing European guidelines subject to the same requirements, in the areas of corporate governance, remuneration of directors, tax policy and due diligence.

<p><strong>Responsible Capitalism:</strong><br />
An Opportunity For Europe</p>
(144 pages)
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