Legal & Regulatory News

European Council set to push for finance exclusion from CS3D

On 15 November, a meeting of the Committee of Permanent Representatives in the European Union took place, during which a proposal from the Spanish Presidency on the EU Corporate Sustainability Due Diligence Directive (CS3D) was endorsed. This proposal was seen by members of the press ahead of a council working party meeting on 10 November.

The proposal suggested to exclude the finance sector from CS3D, a change in direction from the general approach published in November 2022, where the European Council agreed that the decision to apply CS3D to certain financial services would be left to Member States. Under the new proposal, the finance sector could be brought under the scope of CS3D through a review clause if a thorough impact assessment had been carried out.

The inclusion or exclusion of the finance sector has been a key point of contention amongst member states of the European Council and in the trialogues between the European Council, European Commission and the European Parliament. On 14 November, a Member of the European Central Bank’s Executive Board, Frank Elderson, expressed the view that “financial undertakings should not be treated differently from other companies” to prevent these institutions from failing to incorporate sustainability into their business models and risk management practices.

Ahead of the trialogue meeting on CS3D on 22 November, the Spanish Presidency will need to draft a more detailed mandate for negotiation. CS3D is expected to be formally adopted in 2024 and come into effect in 2025.

Click here to read the general approach on Corporate Sustainability Due Diligence and amending Directive.

Click here to read Frank Elderson’s speech.