CSDDD: Financial sector excluded

On the night of 14 December 2023, the EU legislators reached a preliminary agreement in trilogue on the Corporate Sustainability Due Diligence Directive (CSDDD). According to currently available information, the contentious Article 8a, which we had concerns about, is set to be removed, and for the time being, investment activities will be temporarily excluded from the scope of the CSDDD. A review clause stipulates that a decision on the potential inclusion of financial companies should be made in a few years based on a sufficient impact assessment.

The German fund association BVI has advocated for an exemption for asset managers as investors in target companies, differing from companies within the scope of the CSDDD since mid-2022.

It is good that, for now, the investment activities are exempted from the expansion of due diligence obligations under the CSDDD. Investment companies typically act as minority shareholders, thus having limited influence over the operations of their portfolio companies. Additionally, they already adhere to due diligence obligations concerning the adverse effects of their investment decisions on sustainability, as outlined in the SFDR and the EU Investment Fund Directives. These obligations rely on standardized information that companies will publish in future in accordance with the EU Sustainability Reporting Directive, aligning better with the needs of capital market investors.

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