Plans to exclude finance from EU environmental due diligence legislation aren’t going down well with supervisors in Frankfurt
ADVERTISEMENTEU banking supervisors have hit out at proposals to exclude the financial sector from new green supply-chain rules, as legislators finalise plans to enforce sustainability checks on nonfinancial companies.
The Corporate Sustainability Due Diligence Directive is a centrepiece of EU green-finance laws, requiring a swathe of businesses to identify and mitigate environmental and human rights impacts.
In particular, under plans put forward by the European Commission in February 2022, larger businesses based in or trading in the bloc would have to verify that their activities – and those of their suppliers – aren’t causing damaging climate change.
But a document seen by Euronews, prepared by the Spanish government and dated 13 November, suggests legislators want to excuse financial companies from the measures — an outcome that doesn’t find favour in Frankfurt.
Spain is currently shepherding negotiations as the presidency of the EU Council, the EU institution which needs to agree on the final due diligence law and which is currently thrashing out its finer details.
“In the absence of clear reasons to the contrary, which I fail to see, financial undertakings should not be treated differently from other companies,” Frank Elderson, a Dutchman who is vice-chair of the ECB’s supervision arm, said in a speech today (14 November), referring to the Directive. “For private finance to be able to effectively support the green transition of the real economy, it is crucial that regulatory and legislative changes are consistent across sectors.”
The ECB, responsible for overseeing the 120 or so largest lenders in the eurozone, has set 2024 as a final guideline for banks to follow its climate change guidance, and Elderson today revealed that a number of institutions didn’t meet a March 2023 interim target.
Banks that don’t follow the ECB’s strictures will have to pay a daily penalty, Elderson said, adding that ignoring the impact of climate change “calls into question the fitness and propriety” of the executives in charge of such banks.
But Elderson’s warnings appear set to go unheeded by negotiators in the Council.
“The Presidency would propose to exclude the financial sector from the scope of the directive,” said the document drafted by Spain, which is chairing talks on the file, ahead of a Wednesday (15 November) meeting of national diplomats.
As part of the bargain with Members of the European Parliament, who must also agree the law, Spain is also seeking a number of extra measures likely to cause consternation among businesses worried about extra red tape.
The 13 November note proposes tying company directors’ pay and bonuses to progress in slashing fossil fuel usage, and would make it possible for trade unions and non-governmental organisations to bring legal cases if companies fail to comply.
