The Spanish Presidency of the Council is set to propose an initial exclusion of financial institutions from the Corporate Sustainability Due Diligence Directive (CSDDD), Responsible Investor understands.
The CSDDD, which will impose mandatory human rights and environmental due diligence requirements on corporates, has had a bumpy journey through the legislative process to the trilogue stage, which got underway in September.
Since the first trilogue, which according to stakeholders focused mainly on the technical aspects of the due diligence process, the council of member states has had a series of working-party meetings.
Among the topics discussed in the council meetings has been the controversial issue of the inclusion of finance, which the council and parliament have been split over.
The former agreed last year that inclusion would be up to member states, while the latter voted for financial institutions – including asset managers – to be covered to a large extent by the directive.
RI now understands that in the council’s working party meeting tomorrow, the Spanish presidency will propose an approach that will have a possible exclusion of the financial sector with a review clause for the extension to it at a later stage.
If member states do not agree on this approach, the presidency will suggest analysing other options for the inclusion of finance.
The reason behind the move, RI understands, is that the council is split on the extent to which the financial sector should be included. France in particular is lobbying for a exclusion with a review clause.
But the expected presidency position is a somewhat unexpected move, after RI revealed last week that the Spanish presidency put out a flash note, which described the positions of parliament and the council, and put forward a series of questions to work out what member states might find acceptable when it comes to the inclusion of finance.
Several stakeholders praised the statement, adding that it appeared to be trying to get the council closer to the position of the parliament.
When it came to member states’ positions there was a clear divide.
An observer closely following the negotiations told RI that, at one end of the spectrum, it appeared France was against any kind of inclusion of finance, although it was for including a review clause. This position was backed by smaller member states such as Slovakia and Malta.
By contrast, the Netherlands, Denmark and Portugal were pushing for full inclusion of entire sector, including asset managers, the observer said.
Between the two extremes were Italy and Germany, which wanted to focus on finance companies that have a “direct business relationship” with corporates – effectively banks and insurers.
Throughout the CSDDD’s journey, investors and investor networks – such as Eurosif, PRI and IIGCC – have continuously advocated for it to cover the whole of the financial sector.
A council presidency spokesperson confirmed to RI that there will be a meeting tomorrow and that the CSDDD will be discussed but declined to comment further.