The Association for Financial Markets in Europe (AFME) has released a report outlining concerns with the upcoming Corporate Sustainability Due Diligence Directive (CS3D). The AFME highlights areas where the CS3D falls short of its objectives and provides recommendations for improvement.
Facts
- The CS3D aims to serve as a tool for financial institutions to identify risks, engage with clients, and establish a legal framework for due diligence on human rights, environmental impacts, and sustainable initiatives.
- The AFME identifies six areas of concern: value chain, risk-based due diligence, preventing and mitigating adverse impacts, civil liability, combatting climate change transition plans, and directors’ duties.
- The AFME recommends adjusting phrasing and clarifying wording in these areas to enhance the transparency and specificity of the directive.
- The CS3D should align with the Corporate Sustainability Reporting Directive (CSRD), as well as international and EU initiatives related to climate change.
- The AFME advises adopting a “proportionate, risk-based approach” to define the “value chain” for financial institutions and revising due diligence policies to prioritize urgent threats and immediate impacts.
- Oliver Moullin, Managing Director at the AFME, emphasizes the need to avoid harming EU companies’ competitiveness or the role of banks in supporting the transition and calls for a practical and legally certain framework that enables effective due diligence.
