Background. The Commission adopted a CSDDD proposal in February 2022. The aim of the Directive is to improve and harmonise companies’ integration of human rights and environmental considerations in operations and governance by mandating value chain due diligence obligations (identifying, mitigating and preventing adverse impacts), transition plans and establishing a corresponding liability regime. The Commission’s original proposal text was already significantly watered down on directors’ duties and environmental objectives (see our reaction from February 2022).
The agreed general approach of the Council eliminates the financial sector from the scope of the Directive altogether – a significant hit compared to the Czech presidency text circulated a few days before the agreement. With this, the Member States give financial institutions a free pass to continue facilitating unlawful corporate practices in violation of international human rights agreements, and major environmental and fundamental freedom conventions.
The exclusions mean, among others, that financial institutions will neither be obliged to conduct due diligence on their clients nor adopt and implement meaningful transition plans to align their operations with the EU climate objectives.
Julia Symon, Finance Watch Head of Research & Advocacy l, said: “The blanket exemption of financial institutions greatly undermines the EU sustainable finance agenda. It threatens the efforts of many financial institutions already considering environmental and social factors in their business models. Competitiveness considerations of a few Member States are taking priority over compliance with international human rights and environmental agreements of the EU”.
To arrange an interview with Julia Symon, Finance Watch Head of Research & Advocacy, please contact Alison at alison.burns@finance-watch.org or call on +32 (0)471577233
About Finance Watch
Finance Watch is an independently funded public interest association dedicated to making finance work for the good of society. Its mission is to strengthen the voice of society in the reform of financial regulation by conducting advocacy and presenting public interest arguments to lawmakers and the public. Finance Watch’s members include consumer groups, housing associations, trade unions, NGOs, financial experts, academics and other civil society groups that collectively represent a large number of European citizens. Finance Watch’s founding principles state that finance is essential for society in bringing capital to productive use in a transparent and sustainable manner, but that the legitimate pursuit of private interests by the financial industry should not be conducted to the detriment of society.
