Yet, while the European Commission first committed to tabling a legislative proposal on Corporate Sustainability Due Diligence (CSDDD) in 2020, entering the latter stages of 2023 we are still debating key fundamental principles of the law.

None of these is as key as to whether or not the financial sector must be accountable for its impact on climate and social progress.

Throughout October, the Spanish President will guide Member States to review its position on CSDDD and try to reconcile the conflicting views on how the sector should be covered.

This ongoing debate on CSDDD is happening in parallel with the debate on the EU Sustainable Finance. The latter focuses on transparency and classification of financial products, whereas CSDDD is intended to complement this by asking the sector to mainstream sustainability risk mitigation across all of its activities.

CSDDD is rightly focusing on the downstream risks that the financial sector faces when offering financing and investment services.

It has been repeatedly shown that the sector has a big problem, no more so than in the WBA Financial System Benchmark which shows that only 3% of the sector discloses how they identify human rights risks and impacts within their financing activities, and less than 5% of financial institutions assessed acknowledging any process to identify the impact of their financing activities on nature.

If governments are serious about leveraging the undoubtedly awesome power of the financial sector, the current landscape shows they need to force a change...

Will CSDDD prevent banks from lending to companies with known human rights issues? No, but they will need to better understand those risks and monitor their development

Will it prevent asset managers from investing in a carbon-intensive company? No, they will need to meaningfully engage and push for a clean transition.

Will this prevent insurers from underwriting a risky infrastructure project? Again, no, but they will need to identify these risks and factor that into your business relationship.

This law will not make the European financial sector less competitive; on the contrary, it will make it more reliable, consistent, and trustworthy. And most importantly, it will give finance a role as an accountability gatekeeper where they will move from being part of the problem to part of the solution...