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November 1, 2023

EU corporate sustainability due diligence rules must include finance sector, says WWF

Cattle in a burnt area of the Amazon. European banks have been accused of financing companies linked to massive deforestation (Photo: Antonio Scorza/AFP via Getty Images)
Cattle in a burnt area of the Amazon. European banks have been accused of financing companies linked to massive deforestation (Photo: Antonio Scorza/AFP via Getty Images)

The WWF and the UN High Commissioner for Human Rights have called for an ambitious – and comprehensive – EU Corporate Sustainability Due Diligence Directive, to protect both people and the environment

A Corporate Sustainability Due Diligence Directive that includes the financial sector would make it less likely that “environmental or human rights harms” by financial institutions are replicated in the future, said a briefing by the World Wide Fund for Nature’s European policy office.

As the European Commission, parliament and council continue to discuss the EU’s CSDDD, environmental and human rights campaigners insist that an ambitious outcome is vital for nature, the climate and people. 

The WWF briefing highlighted three cases where banks have been accused of not carrying out proper due diligence before financing projects that have had a negative impact on local communities and the environment. 

They include the funding of open-cast coal mines in Colombia run by Prodeco, a subsidiary of mining giant Glencore, as well as the Paraguayan operations of Brazilian beef company Minerva. Both projects were financed by several European banks, said the report. 

Minerva’s operations have been linked to “massive deforestation”, said the WWF, citing a 2020 report by UK non-profit Earthsight. Meanwhile, the mines in Colombia have “substantially polluted the environment”, it says, referencing research by Tierra Digna, a Colombian association that represents local communities. This links contamination from the mines to the pollution of rivers and “the abnormally high rates of respiratory diseases as well as lung and stomach cancers” in the area.

The third case mentioned by the WWF was raised earlier this year by international non governmental organisation Global Witness. In it, Dutch export credit agency Atradius Dutch State Business was accused of providing insurance for the New Manila International Airport, Philippines, “despite serious concerns raised by local communities pointing at coercive consultation processes and dubious environmental impact assessments”.

The WWF concludes that a robust CSDDD that included financial institutions would have “minimised” “such impacts” and ensured “more responsible financial practices”.

French connection

“Deforestation, pollution, harm to coastal areas and human rights violations are just a few stark examples of what’s at stake, and the financial sector is instrumental in minimising such harms,” said Uku Lilleväli, WWF’s sustainable finance policy officer for Europe, in a press statement. 

“It is inconceivable that some policymakers want laws that would allow financiers to seek investment returns with no safeguards for the environment and human rights,” she added.

In July 2023, French non-profit Observatoire des multinationales suggested the French government was leading a call in Brussels to exclude financial institutions from the directive. 

“France is the largest financial sector in Europe. Often it is against more regulation and the laws that are needed to move the financial flows for the transition,” Lucie Pinson, founder and director of Reclaim Finance, another French non-profit, told Sustainable Views. 

WWF’s Lilleväli added that “robust due diligence requirements for financial activities are a necessity, to ensure sustainable financial practices and effective risk management”.

However, Atradius spokesperson Nahuel Mercedes said: “It is difficult to say whether a CSDDD would have given another outcome. We assessed this project based on international OECD and IFC guidelines. 

“We conducted due diligence before and are now monitoring this project intensively. We always take into account new information and concerns provided by civil society and local parties,” Mercedes tells Sustainable Views.

Glencore and Minerva have been contacted for comment.

Earlier this week, UN High Commissioner for Human Rights Volker Türk issued a statement calling on EU institutions to ensure the CSDDD is “aligned with internationally accepted UN standards on business and human rights”.

“European businesses have a very important role to play in respecting human rights, and the directive will provide an important instrument legally mandating them to do so,” said Türk.

 

A service from the Financial Times