Members of the European Parliament (MEPs) have voted in plenary in favour of including institutional investors and asset managers in the Corporate Sustainability Due Diligence Directive (CSDDD).

The European Parliament’s plenary adopted the proposal with 366 votes in favour, while 225 voted against and 38 abstained.

The proposed directive will impose mandatory environmental and human rights due diligence requirements on firms, with institutional investors to be included.

It will now move on to trilogue debate between the European Parliament, the European Council and the European Commission, with discussions expected to commence in the coming weeks and an agreement on the final rules anticipated before next year’s parliamentary elections.

If passed, the CSDDD will require institutional investors and asset managers to engage with investee companies about human rights violations and negative impacts in their value chains.

The Dutch Federation of Pension Funds said it was in favour of giving investors this role within the CSDDD and called on the European Council to adopt this amendment in the trilogue discussions.

Commenting on the announcement, Principle for Responsible Investment (PR) head of EU policy, Elise Attal, said: “PRI welcomes the outcome of the successful vote on the CSDD.

“The agreed text is an important step forward in creating a practical and effective directive which provides needed clarity in the EU's sustainable finance policy architecture.

“As negotiations continue, it is important to maintain and, in some cases, further develop the parliamentary text to ensure positive real-world impact.

“We welcome the risk-based approach to due diligence, in line with international standards, and the climate-related requirements.

“However, a greater acknowledgment of the investor approach to due diligence is needed, building on from the specific Article 8a voted in to encourage investor due diligence through stewardship, as well as clarification of the definition of value chain for the financial sector.”

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