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Article

7 Mar 2019

Author:
Global Witness

Global Witness: EU Parliament & Council reach political agreement on new set of rules for investor due diligence

'Global Witness celebrates significant agreement and shift in mind-set from the EU on investor due diligence', 7 March 2019

The European Parliament and Council have today reached a provisional political agreement on a new set of rules requiring European investors such as banks and insurers, to carry out due diligence.

This means investors will need to disclose the steps they have taken to address the adverse impact of their investment decisions on people and planet.

The agreement, which was reached in the early hours of this morning, also fundamentally redefines the risks that investors must consider when decision making – moving away from pure financial risk to their profits, and towards risks to human rights and our global environment. [...]

The rules still however, the NGO said, have weaknesses. They will not automatically apply to all investors as pension funds are out of scope leaving a large part of the market exempt from due diligence.

On top of this, investors will initially only be subject to a ‘comply or explain’ compliance mechanism, although it will become mandatory for large investors after 18 months. This means that investors themselves will need to determine whether they consider the adverse impacts of the investment decisions or not. [...]

The new rules are a cornerstone of the EU’s Action Plan on Financing Sustainable Growth which was launched in March last year. The EU is currently leading the way on ensuring finance is re-orientated towards sustainable economic activity.

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