Political negotiations on the Corporate Sustainability Due Diligence Directive (CSDDD) have concluded today.

Commenting on the outcome, Isabella Ritter, EU Policy Officer at ShareAction, said: "In the EU negotiation dance, we've scored an important win for people and planet - financial institutions, including banks, insurers, and investors, remain within the scope of the CSDDD and will now have to adopt a Paris-aligned transition plan. Yet EU negotiators have missed a resounding opportunity for more transformative change. Despite strong support from financial sector representatives and civil society, EU policymakers, due to the Council’s pressure, chose to exempt financial institutions from due diligence requirements when offering financial services to their clients. This grants financial institutions a free pass to neglect human rights and environmental harms."

The exclusion of due diligence rules for financial institutions on their clients' activities, confining them solely to the review clause at a later stage, strikes a discordant note. The financial sector will only have to check whether there are human rights and environmental harms in their own operations.

Nevertheless, the mandatory adoption of transition plans by financial institutions is a definite high note, emphasizing their key role in fighting climate change. Article 15's transition plan provisions, which require the setting of time-bound targets and their implementation, will establish a coherent framework, compelling financial actors to take their climate pledges more seriously. The plan's implementation can be further incentivized through financial rewards for directors.

The spotlight now shifts to the next steps, with the European Parliament and EU Member States needing to validate the agreement in the upcoming plenary session and Council votes. These crucial decisions are anticipated in the early months of 2024, ahead of the European elections. It is critical that EU lawmakers and EU Member States do not bring down the EU’s first corporate accountability law in the final steps.