The PRI welcomes the EU proposal for a directive on Corporate Sustainability Due Diligence (CSDD). It offers an important opportunity to create a harmonised framework to ensure that economic activities tied to the EU single market are conducted in a responsible manner. However, significant improvements are needed, as set out in PRI’s position paper published September 2022.
In this accompanying paper, PRI sets out recommendations to make the due diligence obligations practicable for the financial sector (specifically institutional investors and asset managers). The paper highlights the need to:
Clarify the civil liability regime using the concepts “cause”, “contribute” and “directly linked”. In cases where investors are linked to impacts, they should not be subject to legal liability.
Introduce a risk-based approach to due diligence, which is tailored to investors taking into account varied amounts of leverage, different stewardship approaches and the need for divestment to be a last resort. And to provide guidance on this.
Ensure the CSDD is coherent with the EU’s wider framework on sustainable finance, including, but also looking beyond, the avoidance of duplicative reporting.
Provide sector specific guidance on what an “acceptable level” of due diligence is and how investors can use/augment the tools they already have at their disposal to comply with the CSDD.