The European Parliament has voted in favor of proposed rules which would require companies, including financial institutions, to be accountable for any human rights and environmental breaches in their value chains. The vote passed on 1 June despite last-minute pushback from several centre-right MEPs.
The draft text of the corporate sustainability due diligence directive (CSDDD) passed 366 to 225 and goes further than a version proposed by the EU Commission and EU Council, which did not include financial services. Instead, the council had proposed leaving it up to member states.
The rules are now up for negotiation between parliament, the EU Commission and member states, often referred to as the trilogues. MEPs will likely struggle to keep financial companies included in the next draft, said Olivier Guérin, EU advocacy officer at climate lobbying firm Reclaim Finance.
“We do not know yet where it is heading. We think that some of the financial actors will remain, but we can’t be sure. The echoes we’ve heard from some MEPs that are negotiating the text in the trilogue is that it will be quite an uphill battle,” he said.
In the EU parliament draft, financial service companies, including institutional investors and asset managers, would be required to prevent and identify, end, or mitigate any actual or potential impact in their value chain on environmental and human rights violations.
The value chain includes sales, distribution, transport, storage, and waste from products and services, as well as supply chains. For financial institutions, the value chain includes “the activities of the clients directly receiving such financial services provided by financial undertakings”.
Another key amendment would require companies to not just adopt transition plans, but also implement them in line with the corporate sustainability reporting directive (CSRD).
“This changes a lot of things because if you just ask people to adopt something and they can just publish it, it’s just an obligation basically. But with this implementation, you will have to not just adopt [it], but put it in place and run it,” Guérin said.
Vincent Vandeloise, senior research and advocacy officer at Finance Watch, said the EU parliament’s text “is a fair compromise” and “the inclusion of financial services, including investment activities, is key to tackling human rights violations and adverse environmental impacts”.
“Adequate sector-specific guidance for the value chain of financial services is still needed and some concessions have been made in favour of industry, but the European Parliament’s position is a good basis on which to kick off discussions with the council and the commission,” he added.
This page was last updated June 14, 2023
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