In a significant decision, the European Parliament conducted a plenary vote on June 1, 2023, to extend the due diligence requirements for asset managers regarding ecological responsibility and compliance with international human rights standards.
The vote centred around the Committee on Legal Affairs report on the EU Corporate Sustainability Due Diligence Directive (CSDDD), which aimed to introduce new obligations for asset managers in their investment decisions.
The report, serving as an extension of the Commission proposal, proposed the implementation of stricter due diligence measures for asset managers.
Since March 2021, large asset managers with over 500 employees and institutional investors such as insurance companies and pension funds must adopt due diligence measures to address the principal adverse impacts (PAI) stemming from their investment decisions.
These impacts encompass environmental, social and labour concerns, human rights, anti-corruption and anti-bribery measures.
Additionally, the identified adverse impacts must be disclosed in the Sustainable Financial Disclosure Regulation (SFDR).
While the CSDDD’s extension was seen as a positive step towards sustainable investment practices, critics, including the German Investment Funds Association BVI, voiced concerns.
According to a spokesperson for the association, the extension failed to distinguish between asset managers as companies and investors.
They emphasized that asset managers, as investors, possess limited influence and participation rights compared to their contractual relationships with service providers.
The spokesperson further argued that the existing SFDR already imposed due diligence obligations tailored to the specificities of the fund industry and highlighted the need for the EU Commission to evaluate the practical impact of the SFDR on addressing environmental and social problems before imposing further requirements
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