EU: Inclusion of finance sector in due diligence law on the brink
First proposed by the EU Commission in February this year, the CSDDD aims to make companies responsible for human rights violations and international environmental standards in their value chains. It is currently negotiated in Parliament and among member states in the EU Council, where the Czech Presidency seeks to find an agreement on Thursday.
While the chief negotiators of the EU member states seemed to have a sufficiently large majority after the last negotiation round on Friday (25 November) to table the issue for a vote among ministers this week, France, Italy, Spain, and Slovakia now threaten to form a blocking minority in case the text would not be changed, multiple EU sources confirmed to EURACTIV.
According to a French proposal to amend the Council position, seen by EURACTIV, the goal of the minority is to exclude banking services from the scope of the CSDDD. This would mean that banks could not be held liable for human rights violations that happen through business activities financed by their loans.
However, “if the banking sector gets taken out, there might be a blocking minority on the other side,” the diplomat of an EU member state told EURACTIV, referring to the dissatisfaction among some member state governments that the scope of the directive had already been narrowed down too much.
Last week, for example, it became clear that the Council position would exclude investment activities from the directive’s scope.
To find a compromise, member state negotiators will reopen the debate on the common position on Wednesday (30 November), one day ahead of the meeting of member state ministers who should pass the ‘general approach’, as the member state position is called...
However, this sentiment is not shared by all investment companies. On 24 November, an alliance of sustainable investment associations and companies issued a statement calling for “robust, ongoing due diligence from financial and non-financial companies throughout the value chain.” ...
Before the directive can be passed, the member states will have to agree with the European Parliament. In the European Parliament, however, the process of finding a common negotiating position on the CSDDD is less advanced and is expected to take until March 2023.
There, the finance industry could meet a less welcoming environment.
See also: The EU must not let the finance sector off the hook on sustainability, opinion piece by Richard Gardiner & Flora Rencz of the World Benchmarking Alliance (WBA)