AFME calls on negotiators to consider serious outstanding issues in CSDDD

AFME has released a position paper urging negotiators to address important concerns in the CSDDD. AFME emphasizes the need for a practical and appropriate regulatory approach that considers the interests of financial institutions. They highlight several key issues that need attention during the trilogue negotiations:
– Value chain: AFME suggests limiting due diligence requirements to upstream direct business relationships to avoid challenges associated with applying these requirements to financial institutions‘ downstream value chain. If the downstream value chain is included, it should be limited to large corporate clients receiving loan or credit services in the EU to ensure a harmonized approach within the Single Market.
– Risk-based due diligence: AFME recommends that entity-level due diligence policies should be periodically updated, and the identification of adverse impacts should be conducted prior to client onboarding and specifically for subsequent loans. It is not feasible for banks to effectively identify adverse impacts for every individual payment or trade, nor continuously monitor potential adverse impacts across all counterparties.
– Preventing and mitigating adverse impacts: AFME cautions against requiring financial institutions to terminate the provision of financial services, as it could negatively impact the stability of European markets. They call for clear and unambiguous wording in the directive to avoid legal and liability issues stemming from different interpretations.
– Civil liability: AFME suggests that civil liability should be limited to cases where a breach occurs intentionally or through gross negligence, causing or directly contributing to adverse impacts, and where a direct causal link between a company’s operations and the damage can be established.
– Combating climate change – transition plans: AFME emphasizes the need for consistency and coherence with the CSRD and existing EU and international initiatives. They advise against introducing additional requirements that could create divergence.
– Directors‘ duties: AFME raises concerns that Article 25 of the CSDDD interferes with national provisions regarding directors‘ duty of care, potentially undermining their obligation to act in the best interests of the company.