The Dutch Federation of Pension Funds has called for the pension sector to have a role in the European Union’s (EU) Corporate Sustainability Due Diligence Directive (CSDDD).

In a joint letter with the Association of Dutch Insurers and the Dutch Banking Association, the pension federation has called for the three financial sectors – pensions, insurance and banking – to have a role in the CSDDD.

The letter, addressed to Commissioner Didier Reynders, Commissioner Mairead McGuinness, MEP Lara Wolters and Minister María Pilar Llop Cuenca, stated: “We believe that businesses – including financial institutions - can play a key role in reducing human rights violations and tackling environmental problems.
“The Dutch insurance, banking and pension sector signed covenants in 2016 and 2018 to implement the OECD Guidelines for Multinational Enterprises (OECD Guidelines) to reduce human rights violations, environmental damage and other harmful activities in our lending and investment activities.”

The CSDDD proposal aims to require companies to conduct sustainability due diligence to prevent human rights violations and environmental damage in their value chains. The European Parliament and Council are currently negotiating the proposal, with the role of the financial sector a contested topic.

The Council wants to give individual member states the choice of whether or not to include the financial sector within the scope. The trio have warned, however, that this risks creating a patchwork of rules within Europe.

“We understand the co-legislators will soon discuss provisions on financial institutions, such as a member state option that would allow the exclusion of the financial sector and specific provisions for investors. The member state option would impede a level playing field and decrease the effectiveness of measures to counter human rights abuse. With several national frameworks in place or under development, a member state option would create a patchwork of rules across the EU for both financial institutions and their clients,” the letter stated.

The EU policymakers are urged to bring financial institutions in scope of the CS3D based on the risk-based approach from the OECD Guidelines. This enables financial institutions to identify and address so-called adverse impacts in the most efficient and effective manner, given the size of the portfolio of customers and proportionate to their capacity.

“Financial institutions are already familiar with these guidelines, which allows prioritisation of adverse impacts based on severity and probability. It is also important to note that the adopted Corporate Sustainability Reporting Directive (CSRD) already requires financial institutions to report on human rights and environmental due diligence from a risk-based approach. For us and many other businesses, consistency between the CSDDD and the CSRD is crucial,” the trio wrote.

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