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22 Nov 2023

Sophie Robinson-Tillett, IPE

EU: Member states split over inclusion of finance sector

"Concerns grow over fate of EU sustainability due diligence law"

[...] Countries split over role of finance

One of the biggest battlegrounds for the CSDDD is proving to be the inclusion of the finance sector.

Over recent weeks, a split has emerged in the European Council between member states that want the entire finance sector covered by the law (The Netherlands, Finland and Denmark); those who only want banks and insurers covered (Germany, Italy and Ireland); and those that want finance exempt (France, Czech Republic, Bulgaria, and a number of others).

Germany and its allies argue that due diligence is reasonable when institutions sign contracts with companies, like lenders and insurers, but this is not the case for portfolio managers, whose relationships are more fluid and indirect.

Denmark is pushing for the inclusion of finance because it already has a national due diligence law, so an EU equivalent could reduce competitive disadvantages.

But France, which has been unflinching in its determination to have finance removed from the EU proposals, also has a national due diligence law. Introduced in 2017, the French Vigilance Law covers financial institutions.

Insiders say the country’s push to omit finance from CSDDD is being driven by its banking sector.

“One diplomat described this as a trialogue not just between the Commission, the Council and the Parliament,” said Julia Otten, a senior policy officer at purpose-driven law firm Frank Bold. “But one where the finance sector is clearly sitting at the table, too – mainly French banks.” [...]

There have been some supportive voices on the inclusion of finance. [...]