DWS Group

Although the entity supports the proposal in principle, it shows concerns about the potential detriments for the competitivenes of the European Union

The entity states that ‘BVI supports the EU initiative for establishing binding rules on sustainable corporate due diligence. … BVI members are committed to the objectives of the EU Action Plan for facilitating sustainable growth. … Therefore, we perceive the CSDD initiative as an essential element of the EU sustainable finance strategy and a substantive counterpart to the sustainability-related reporting requirements under CSRD. … At the same time, fund managers will be affected by the envisaged CSDD framework in their own business operations, provided they reach the relevant thresholds defining the scope of application. In view of this double perspective … we also share the widespread concerns about the cost-benefit-ratio and potential detriments for the competitiveness of the European industry in the global context. Due to the large number of EU regulatory initiatives in the sustainable finance space, the regulatory landscape has grown very complex. A more streamlined regulatory approach to the basic concepts underlying the EU regulations would be most helpful for enhancing understanding among the affected market participants, avoiding inconsistencies and overlaps and reducing the implementation burden for companies and investors’.

The entity asks to narrow the scope for asset managers to exclue investment activity, supporting a more limited application based on business function.

The entity states that 'We request supplementing recital (19) of the draft Directive on application to regulated financial undertakings by a sentence clarifying that adverse impacts arising from investment decisions in investee companies are to be dealt with under SFDR rules and consequently, are not subject to CSDDD requirements'. It points out that 'The SFDR framework sets out detailed due diligence obligations for consideration of principal adverse impacts in the investment decisions by financial market participants, whereas the companies’ reporting duties with regard to actual and potential adverse impacts are to be laid down under the new CSRD regime'.

The entity argues that the current liability framework discourages financial undertakings from using the derogation intended to allow continued engagement with business partners. This undermines efforts to exert leverage or support remediation.

The entity states that 'The entity states that ‘rules must be feasible in the overall context of sustainable due diligence in order to attain their eventual intention of providing relief. This pertains in particular to the proposed derogations under Articles 7 (6) and 8 (7) of the draft Directive. It appears that while financial market companies shall not be required to terminate a contractual relationship in case an adverse impact cannot be effectively prevented or mitigated, they will still be subject to full civil liability under Article 22 (1) unless they are able to prove that such termination would have been “reasonably expected to cause substantial prejudice” to their business partner. Given the nature of such derogation as relief from the general standard, we would expect that the burden of proof would lie with the financial undertaking. Under such circumstances, it is hard to imagine that any financial undertaking would be ready to bear the liability risk and make use of the derogation’.

The entity supports applying due diligence to business relationships in operations but rejects its application to investment chains, advocating for a narrower scope for investment companies.

The Entity states that '‘Large asset managers and other institutional investors such as insurance companies and pension funds are already required by the SFDR framework to adopt due diligence policies … Hence, it should be clear that both principal adverse impact rules under SFDR and due diligence rules under CSDDD are aiming to tackle the same problem, namely preventing potential or reducing actual adverse impacts on people and the planet. However, while the SFDR rules are tailored to companies in their role as investors, the CSDDD provisions focus on business relationships and companies’ day-to-day operations. … We request supplementing recital (19) of the draft Directive on application to regulated financial undertakings by a sentence clarifying that adverse impacts arising from investment decisions in investee companies are to be dealt with under SFDR rules and consequently, are not subject to CSDDD requirements’.

The entity considers that contractual assurances are not applicable to its sector.

It states that 'contractual assurances from business partners for ensuring compliance with a company’s code of conduct which represent a core element of sustainable due diligence under CSDDD are clearly not practicable in investment situations, especially in case of minority free float shareholdings in listed companies. Instead, actions envisaged under SFDR for avoiding or reducing principal adverse impacts are more targeted ...'.

The Company supports directors' duties and calls for extending it to reporting requirements (CSRD)

The entity states that 'Investors need to be able to hold directors accountable for their compliance or non-compliance with the extended duty of care as proposed under Article 25 (1) of the draft Directive. Without corresponding disclosures, there will be very limited possibility for asset managers and other investors to assess whether the consequences for sustainability matters have been duly taken into account in the business decisions. We believe that such disclosures should be covered by sustainability reporting under Articles 19a and 29a CSRD and should be expected as part of the information on how the undertaking’s strategy takes account of the interests of its stakeholders and of the impacts on sustainability matters'.