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9 Nov 2023

Associated Press (AP)

Spanish EU Council Presidency proposes exclusion of finance from due diligence directive & review clause for later coverage of sector

'Spanish Presidency mulls excluding finance from due diligence rules' (Euractiv)

The Spanish Presidency of the EU Council is leaning towards the exclusion of the financial sector from the EU corporate accountability rules, which are currently under inter-institutional negotiations, according to an internal document seen by Euractiv.

In the document, prepared ahead of a meeting of member state attachés on Friday (10 November), Spain – which is currently at the helm of the rotating EU Council Presidency – proposes to exclude finance from the EU corporate sustainability due diligence directive (CSDDD), a law set to make large companies accountable for human rights and environmental violations along their value chains.

The exclusion of the sector is proposed due to the internal divisions among member states on the issue which, according to the text, could put the overall agreement on the law at risk.

In their general approach adopted last December, member states agreed to leave the inclusion of the sector as a national option, a move spearheaded by France, which continues to strongly support a carve-out of finance from mandatory due diligence requirements. [...] The Parliament had voted in favour of the inclusion of finance in June.

Compensating elements

In order to find a compromise solution with the Parliament, the document proposes to include a review clause to cover financial institutions at a later stage, accompanied by a political declaration of the three EU institutions to show strong political commitment.

Moreover, to compensate for the carve-out, the Presidency proposes concessions on other elements where the Parliament was more ambitious than member states. 

These would include access to justice for victims of corporate abuses, remuneration linked to transition plans and the inclusion of new sectors in the scope of the directive. [...]

'Finance may be junked from EU climate law, leaked memo shows. Critics say it could be unenforceable' (AP)

...The Corporate Sustainability Due Diligence Directive was designed to make companies eliminate environmental and human rights violations throughout all areas of their business. The legislation was meant to ensure firms’ operations were aligned with a global rise in temperatures of no more than 1.5 degrees Celsius...

But a Nov. 9 briefing obtained by The AP details a watered-down proposal that would drop the entire financial sector from the initial law...

The proposed rules on the financial sector had led to “difficult problems to overcome in working out a reasonable landing zone” with the European Parliament, [Spain] said. As a solution, “the Presidency proposes … a possible exclusion of the financial sector which would delay the extension to the financial sector to a later stage.”

This came as a shock to campaigners, who warn if it’s kicked into the long grass, the inclusion of finance may never happen. The next European elections are due in June 2024, and many believe after that the chance to add to it will be gone...

Richard Gardiner, head of EU policy at the World Benchmarking Alliance... called the current approach a “massive rowback on the progress made.”

“When you exclude finance you exclude a major driver of change,” he said. “It goes against the majority views of the EU parliament, Commission and most member states,” he added, questioning the “undue influence” of large countries “willing to pander to the financial sector’s lobbying needs.”

René Repasi, lead negotiator on the law’s financial clauses, said in a phone interview that finance was the fuel of the world economy and fundamentally connected to the environment.

He laid the blame for the change firmly at the door of France, but said he was yet to hear a credible or convincing argument justifying their stance. A deal on finance was previously supported by all member states, he revealed. “And then in a last minute move, France said they will veto it.”

“France is the driving factor,” he said...

A source in the French negotiation team said on the phone, “France supports the exclusion of the financial sector from the scope of the directive. “But France supports a certain number of dispositions that reinforce obligations of the financial sector in the framework of this directive.”

...A spokesman for the Spanish presidency of the EU Council declined to comment.

Ambassadors of member countries are due to discuss the new proposals Wednesday. If they agree on them, they will form the basis for the final negotiation with the European Parliament...