FIAN’s Policy Paper on Corporate Sustainability Due Diligence for the Financial Sector
The EU financial sector holds financial assets totalling over 30 trillion Euros,i which is double the GDP of the EU–27 in 2021. Investment funds account for the largest share, with 22.9 trillion euros. Besides its indisputable impact on economic activities, the financial sector is directly or indirectly involved in numerous human rights violations and environmental degradation (HR&E adverse impacts). Voluntary due diligence practices are not effective in preventing theses adverse impacts.
Under the current negotiations for an EU Directive on Corporate Sustainability Due Diligence (CSDDD) several voices, including the European Commission, the Council of the EU, conservative and certain liberal wings at the European Parliament, as well as the financial sector’s lobby, are calling for the exclusion of the financial sector from certain mandatory measures. There is even discussion about excluding investment funds all together or leaving it up to member states to decide whether to include the financial sector. In our opinion, such a preferential treatment of the financial sector is not legally justified considering the enabling role that it plays in value chains leading to HR&E adverse impacts in several cases.
We therefore strongly believe that the forthcoming CSDDD should be applied to the entire financial sector, including investments, and without exceptions, to prevent these adverse impacts and to ensure accountability. In this policy paper, FIAN outlines through examples in Guinea, Brazil and Cambodia why the CSDDD should apply to the financial sector, and the specific requirements that must be guaranteed to ensure its effective application.