"Inclusion of the financial sector in the scope of the EU Corporate Sustainability Due Diligence Directive (CSDDD) is key to us as responsible investors", 6 Nov 2023

We note that a critical topic in the ongoing trilogue negotiations on the final text of the Directive is the extent to which financial actors and activities (lending, insurance, investment) should be in scope. The signatories are committed to responsible investment and to effectively integrating long term sustainability considerations when assessing our impacts on people and planet as well as financial risks to our companies. Key to this ambition is the practice of sustainability due diligence. We are therefore confident that the financial sector should be included in the CSDDD and note that:

• ... Carving out the financial sector or parts of the financial sector such as institutional investors from the scope of the Directive, as proposed by some negotiating parties, would run counter to the international consensus that all businesses – financial and non-financial – have responsibilities to avoid and address adverse impacts on human rights and the environment. It might also inadvertently undermine existing and future implementation of due diligence in the sector by sending the message that environmental and social due diligence is simply not expected of financial institutions or expected only of some. Institutional investors, for example, are key to driving sustainability in the wider economy...
• ... The Corporate Sustainability Reporting Disclosure (CSRD), the Sustainable Finance Disclosure Regulation (SFDR) and the Taxonomy Regulation all expect financial institutions to document and disclose the positive and negative impacts on people and the environment associated with their own activities and business relationships. The existing regulations require financial institutions to disclose information on their sustainability due diligence rather than to implement such due diligence processes. By creating an obligation of conduct to undertake sustainability due diligence, the CSDDD can complement these regulations and supports financial institutions to build robust internal systems and procedures, which are foundational to meaningful disclosures. The due diligence requirement must follow a risk-based approach, cover the full value chain, and be tailored to the specificities of financial institutions and activities. Above all, the due diligence requirements must align with the UNGPs and the OECD Guidelines.
• Financial institutions are uniquely placed to drive positive sustainability outcomes in the real economy and therefore contribute to the effectiveness of the CSDDD... The Directive should harness the force of finance and help those of us already committed to scale the impact of our efforts.

We, the signatories of this letter, call on the Danish and Swedish governments to play a proactive role in the trilogue negotiations and advocate for the inclusion of all the financial sector (banks, insurers, investors) in the CSDDD. Leaving this decision at the discretion of each Member State would pose serious limitations to its effectiveness. For the Directive to be impactful, it should seek to level the playing field for all participants in the global economy and be consistent with authoritative international standards, which already expect financial institutions to conduct ongoing due diligence across all business activities.

[full letter attached]