EU due diligence law's impending inclusion of the financial sector
EU due diligence law's impending inclusion of the financial sector
Share:

ROME: Debate over including the financial sector within the scope of the Corporate Sustainability Due Diligence Directive (CSDDD) is still ongoing ahead of a meeting of EU industry ministers on Thursday (Dec 1), and France, Italy and Spain threatened Is to obstruct an agreement between member states.

The CSDDD, which was first introduced by the EU Commission in February this year, aims to hold businesses accountable for breaking international environmental and human rights standards throughout their value chains.

The Czech presidency hopes to reach an agreement on Thursday in the EU Council, where it is currently being discussed and debated by member states.

Also Read: RBI to unveil the first pilot project of retail digital Rupee on Dec 1

However it appeared that chief negotiators from EU member states had a sizable majority following the final round of talks on Friday (25 November) to put the matter to a vote among ministers this week.

Several EU sources told EURACTIV that France, Italy, Spain and Slovakia now threaten to become blocking minorities in the event that the text is not changed.

According to a French amendment proposal to the Council's stance on access to EURACTIV, the minority aimed to exclude banking services from the scope of the CSDDD.

This would mean that banks could not be held accountable for human rights violations caused by commercial endeavors backed by their loans.

However, a diplomat from an EU member state warned EURACTIV that "if the banking sector is deregulated, there could be a blocked minority on the other side," pointing to discontent among some member state governments that The scope of instruction had already been reduced excessively.

For example, last week it became clear that the Council's position would exempt investment activities from the scope of the directive.

On 30 November, the day before the meeting of member state ministers who will vote on the 'common approach', as the member state position is called, the member state negotiators again discuss the common position in an attempt to reach an agreement. Will start from

Different opinions on CSDDD exist in the financial sector. The text agreed last Friday appears to have pleased Invest Europe, a consortium of investment firms, which previously warned that a too-broad sweep would lead to "a level of trade uncertainty and litigation concerns that could affect the European economy". can make the union as a whole." A very unattractive investment destination."

Also Read:  Third consecutive quarter of losses for Hong Kong's Exchange Fund

"We are reasonably satisfied," Martin Bresson, director of public affairs at Invest Europe, told EURACTIV.

Divergent opinion in the financial industry

However, not all investment companies agree with this view. A group of organizations supporting sustainable investing issued a statement on 24 November urging "robust, ongoing due diligence from financial and non-financial companies across the entire value chain".

An agreement text obtained by EURACTIV puts banks in a different position, as direct lending will still be covered by the directive, unlike equity investments or corporate bonds.

Before it was clear that France, Italy and Spain would threaten to block the agreement, an EBF spokesperson told EURACTIV, "The European Banking Union (EBF) supports agreement on a common approach to the CSDDD."

The consortium of retail and savings banks known as WSBI-ESBG is more important to the directive. According to Peter Simon, Managing Director of the European Savings and Retail Banking Group (ESBG),

"We are convinced that current political and economic circumstances warrant a thorough evaluation of the proposed rules." Simon was referring to the energy crisis and the scarcity of raw materials.

WSBI-ESBG replied to a question regarding French efforts to exclude banking services from CSDDD that they thought "views from the French authorities should be generally welcomed".

Also Read:  Taiwan's economy is in a "softening phase," but China's problems won't be solved quickly

Abandoning an important tool for influencing business behavior?

Meanwhile, representatives of civil society are puzzled by the direction in which the member state negotiations are heading.

According to Sylvia Obregón, a policy officer at the European Coalition for Corporate Justice (ECCJ), "the situation is really bad with respect to the financial sector."

She continued, regretting that this tool would not be used to protect human rights and the environment, as member states text, "financial institutions have a huge influence on the behavior of companies."

"If such a large area is excluded, we will get no closer to our climate goals," the authors claim.

Parliament will also be involved

The member states must concur with the European Parliament for the directive to be approved. Finding a consensus negotiating position on the CSDDD, however, is less advanced in the European Parliament and is anticipated to take until March 2023.

There, the financial sector might encounter an unfriendly setting.

Barry Andrews, a leading member of the European Parliament from the liberal group on the issue, told EURACTIV that the financial services sector "must be included in the scope for the CSDDD to be effective" and that he was "disappointed by the fact that investment activities have been taken out of the scope in the Council text."

Join NewsTrack Whatsapp group
Related News