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16 Oct 2023


EU: Council to discuss inclusion of finance under EU due diligence rules

The inclusion of finance is one of the most contentious points in the ongoing negotiations of the corporate sustainability due diligence directive (CSDDD), first proposed by the European Commission in February 2022 to ensure large companies are held accountable for human rights and environmental violations throughout their value chain.

While the European Parliament voted in favour of mandatory due diligence rules for financial institutions, including asset managers and institutional investors, member states initially opted for a carve-out of the sector in their general approach reached last December.

The inclusion of finance was opposed in particular by France, which pushed to give EU countries the choice to include or exclude finance when transposing the directive into national law.

But given the different positions on the issue, the Spanish EU Council Presidency is seeking a compromise. According to an internal document seen by Euractiv, the presidency is putting a range of options on the table to be discussed by the countries’ law enforcement attachés on Monday and Tuesday (16-17 October).

In particular, the Spanish presidency is testing the waters regarding the possibility of erasing the carve-out agreed in the common position. According to the document, this approach could not only represent a red line for the Parliament but could also compromise the level of harmonisation of the law across the Union.

When it comes to the banking and assurance sectors, the presidency is proposing “a proportional, yet reasonable, obligation for financial undertakings to avoid any potential or actual impact.”

The document recognises the existence of an indirect link between financial services, such as loans and credits, and the adverse impacts created by the beneficiary companies. Still, it excludes the possibility for banks to “supervise the whole value chain of their clients.” ...

Depending on the position of member states on the options presented by the presidency, discussions on whether to include them and how will continue in the coming weeks, with the next negotiation round with the European Parliament expected to take place in November...