EOS at Federated Hermes

Question 2: "Yes, an EU legal framework is needed… we believe an EU legal framework would be beneficial…" Question 3: "Ensuring that the company is aware of its adverse human rights, social and environmental impacts and risks related to human rights violations... and that it is in a better position to mitigate these risks and impacts." "Contribute effectively to a more sustainable development, including in non-EU countries." The entity also rejects voluntary approaches as insufficient, reinforcing the need for legally binding instruments.

EOS at Federated Hermes expresses direct support for the creation of a mandatory European Union legal framework for human rights and environmental due diligence. The entity acknowledges the benefits of such regulation, highlights the need to mitigate risks and adverse impacts, and rejects voluntary approaches as insufficient.

However, since these statements were made in direct response to questions from the official questionnaire, this statement is considered a prompted response, rather than a proactive position.

In response to question 15, the entity discloses that: "Question 15“We believe the due diligence duty should apply across all sectors, including financial services.”...“It is unlikely that any company would have no environmental or social risks in its operations or supply chain.”In question 16, EOS states: "SMEs should be subject to lighter requirements (‘principles-based’ or ‘minimum process and definitions’ approaches as indicated in Question 15)." "SMEs should have lighter reporting requirements." "Smaller businesses also form part of the supply chains of other companies, so they need to undertake due diligence... we therefore believe it prudent they also have some obligation, even if lighter touch."

EOS at Federated Hermes states that due diligence should apply to all sectors, including financial services—one of the traditionally more controversial sectors in this debate. This demonstrates clear support for the full sectoral coverage of the legislation. However, in response to Question 16, the entity explicitly advocates for lighter requirements for SMEs, both in terms of process and reporting obligations. While it affirms that small businesses should still have some responsibility, the request for a “lighter touch” represents a reduction in the normative ambition for universal and uniform application of the directive based on company size. EOS at Federated Hermes supports the broad application of due diligence, including sensitive sectors like finance, and acknowledges that all companies face environmental or social risks. However, by explicitly proposing reduced obligations for SMEs, the entity weakens the principle of full universality in application, even while maintaining recognition of some level of responsibility.

In response to question 15, the entity discloses:“While we do not oppose penalties for non-compliance, we believe top performing companies… should also be championed, supported and encouraged.”In Question 19a EOS supports structured regulatory supervision: "Supervision by competent national authorities (Option 2), with a mechanism for EU cooperation/coordination to ensure consistency across the EU." "A supervisory body would be needed to review due diligence-related reporting and use spot checks or other mechanisms to identify breaches and respond accordingly."

EOS at Federated Hermes supports the existence of enforcement mechanisms in the context of mandatory due diligence, including supervision by national authorities and coordination at the European Union level. The entity also acknowledges the importance of reviewing reports and conducting inspections to identify non-compliance. However, this position does not constitute a strong advocacy for strict penalties. EOS emphasizes a balance between punishment and incentive, proposing that companies with good performance should also be recognized and supported. This approach indicates moderate support for enforcement, without clear activism for more severe sanctions.

In response to Question 5: "Corporate directors should manage the human rights risks for the company in relation to stakeholders and their interests, including in the long run." "Ultimately, all these stakeholders are relevant... but the extent of relevance varies." "Corporate governance and stakeholders are very company-specific." In response to Question 7: "In principle, yes, corporate directors should be required by law to set up adequate procedures and, where relevant, measurable (science-based) targets to ensure that possible risks and adverse impacts on stakeholders are identified, prevented, and addressed." Caveats include: "The requirement must be based on material impacts.""It must relate to key stakeholder groups, not peers or society broadly.""We encourage a ‘comply or explain’ approach…""Transparency is essential for stakeholder engagement, but reporting should be mindful not to discourage use of grievance mechanisms." In response to Question 8: "Directors’ fiduciary duties should remain focused on the company’s interests on behalf of shareholders, while recognizing the importance of environmental and social issues for long-term success."

EOS at Federated Hermes explicitly acknowledges that directors should manage human rights risks related to stakeholders, including in the long term (Q5), and partially supports the creation of legal obligations for setting up procedures and measurable targets (Q7).However, this position is qualified by several caveats, including:Limitation to "material" impacts, Focus on "core" stakeholders rather than a broad scope, Preference for a "comply or explain" model instead of a strict requirement. Additionally, in response to Question 8, the entity opposes a legislative change that would transform fiduciary duty to explicitly include all stakeholders, asserting that this duty should remain centered on the company's interests on behalf of shareholders. While EOS acknowledges the importance of environmental and social issues in governance practices, it does not support a mandatory legal change to directors’ duties that expands the obligation to prevent harm to human rights as an explicit component of fiduciary duty. Although EOS recognizes the importance of directors considering human rights risks and advocates for transparency and stakeholder engagement, it does not support modifying fiduciary duty through mandatory legislation. Its responses demonstrate a preference for approaches based on flexibility, proportionality, and transparency rather than a clear and direct legal obligation.

In its response to questionnaire in phase 2, EOS discloses the foloQuestion 7: "Companies should report on how they identify and address risks and impacts that the company’s activities present to stakeholders." "Such a requirement on procedures could also include public reporting on external grievance and internal whistleblowing mechanisms... This is transparency we value and look for in our stewardship work." "We must be mindful though that reporting requirements do not discourage the effective deployment of such mechanisms... at least initially, be qualitative." Question 20a: "We are not convinced that requiring such mechanisms would achieve any tangible positive outcome..." "It is better that companies take ownership... guided through a set of corporate governance principles and reporting requirements." Question 20c: "Best practices include... complaint mechanisms as part of due diligence." "We support the attendance at annual meetings of representatives of key stakeholder groups, beyond shareholders." "We believe a common standard on how annual shareholder meetings are conducted is needed... but this is an enhancement of existing mechanisms, not the creation of new 'stakeholder general meetings'."

EOS at Federated Hermes supports the existence of grievance and transparency mechanisms as good corporate governance practices. The entity values tools such as whistleblowing mechanisms, enhanced annual meetings with stakeholder participation, and transparent reporting on how risks are identified and managed. However, EOS does not support making these mechanisms legally mandatory. It explicitly states that it is not convinced that legal requirements would bring positive outcomes and prefers that such measures be encouraged through governance principles and external incentives rather than formal regulation.

In response to question 3a, the entity marked: "Responsibility for damages that the EU company cannot control."In Question 19a: "Supervision by competent national authorities (option 2) with a mechanism of EU cooperation/coordination to ensure consistency throughout the EU. A supervisory body would be needed to review due diligence-related reporting and use spot checks or other mechanisms to identify breaches to then respond to. It makes sense for this to fall to national regulators but for there to be a harmonized approach across the EU, so as to reinforce a single market approach."

EOS at Federated Hermes does not select the option for judicial enforcement with compensation, as outlined in Question 19a. Instead, it opts for supervision by national authorities with coordination mechanisms at the EU level, indicating a preference for an administrative enforcement model. Furthermore, by highlighting concerns about the risk of liability for damages beyond the company’s direct control (Question 3a), the entity demonstrates hesitation regarding the broad scope of legal reparations. This can be interpreted as resistance to the judicial liability mechanism with compensation.

Question 14: "We believe that ‘value chain’ would be a better definition… as impacts can also result from a company’s products or services." Question 15: "Any framework should encourage companies to engage with suppliers… Cutting ties with the supplier should be a last resort." Question 5: "The interests of persons and communities affected by the company’s supply chain." "Companies have an important role in supporting and enabling, and not blocking or frustrating, positive policy changes."

EOS at Federated Hermes demonstrates clear support for a due diligence process that covers the entire value chain, including not only suppliers (upstream) but also the impacts related to the company’s products and services (downstream) as indicated in the response to Question 14. Additionally, in Question 15, the entity reinforces the importance of continuous engagement with suppliers, discouraging the severing of ties as the first response to identified risks—an approach aligned with sustained due diligence practices over time. While the response to Question 5 more generally addresses the role of companies in the supply chain and their impact on communities, it complements the entity’s view that due diligence should have social and political reach, even if this response does not directly address legal mandates. EOS demonstrates clear alignment with the full scope of indicator Q3.1 by advocating for the use of the "value chain" definition and acknowledging downstream impacts (products and services). The entity also proposes concrete approaches for supplier engagement and highlights a broad understanding of risks within the chain.

In question 15, the entity responses:“Any framework should encourage companies to engage with suppliers, or parts of their supply chain, where issues are identified.”

While there is support for supplier engagement, there is no mention of specific contractual clauses or formalized codes of conduct. The response demonstrates a guideline for supplier engagement but lacks specific elements (contracts/codes) required for a positive score on this indicator.

Question 5: "We therefore believe societal and government interests may also be relevant..." "The interests of persons and communities affected by the operations of the company..." EOS marked all presented groups as relevant, including: Shareholders Employees Supply chain employees Customers Affected communities (operations and supply chain) Environment (local and global) Long-term consequences (> 3–5 years)

Question 6: "We partially agree that corporate directors should be required by law to identify stakeholders and their interests." "The focus should be on material issues and key stakeholders." "A Statement of Purpose under a ‘comply or explain’ framework would be appropriate." "Such a requirement should come through corporate governance principles, not strict legal mandates."

EOS at Federated Hermes broadly recognizes the importance of mapping and considering the interests of various stakeholders, including affected communities, governments, the environment, and long-term impacts. This reflects a clear understanding of the complexity of corporate impacts and the relevance of multiple stakeholders—directly aligned with the spirit of indicator Q4.1. However, the entity shows resistance to making this identification a legal obligation, preferring voluntary approaches based on corporate governance principles. The proposal to adopt a "comply or explain" model and the emphasis on stakeholder materiality indicate partial support, but without explicitly advocating for a mandatory legal requirement.

In response to question 20a, the entity discloses: "We are not convinced that requiring such mechanisms would achieve any tangible positive outcome on stakeholder interests in practice." "It is better that companies take ownership for such initiatives, encouraged by stakeholders and guided through a set of corporate governance principles and reporting requirements." "We believe there is an opportunity for existing corporate mechanisms to be strengthened." "Annual meetings could be enhanced... to enable stakeholders to engage with directors and hold them accountable."

EOS at Federated Hermes acknowledges the importance of stakeholder engagement mechanisms—including grievance channels, enhanced annual meetings, and increased transparency. However, it explicitly states that it is not convinced that making such mechanisms legally mandatory would be effective. Instead, it recommends an approach based on corporate initiative, stakeholder incentives, and voluntary corporate governance principles. The entity suggests improvements to existing practices (such as annual meetings) and the publication of information on internal mechanisms but rejects the formal regulatory requirement to establish such channels. Despite recognizing the value of stakeholder engagement mechanisms, EOS opposes the legal requirement for their implementation, advocating for a voluntary approach based on governance and best practices.

Question 7: "In principle yes, but with a few caveats." "The requirement must be based on material impacts." "It must relate to key stakeholder groups." "We encourage a ‘comply or explain’ approach." "Transparency supports good engagement between stakeholders and the company." Questions 20b and 20c: "We support the strengthening of the employee and wider stakeholder voice." "They should be invited to discuss their agenda with the full board at least annually." EOS also highlights the following as good practices: "Advisory body, complaint mechanism as part of due diligence..." "Annual meetings should allow for engagement with broader stakeholder groups, not just shareholders."

EOS at Federated Hermes supports the assessment of risks and impacts through structured stakeholder dialogue, including the proposal of formal consultation mechanisms such as advisory bodies and periodic meetings with the board. It also suggests that these forums allow stakeholders to present their agendas directly to the board, with expected public feedback. Although in Question 7 the entity expresses a preference for flexible approaches (such as the "comply or explain" model) and emphasizes materiality and a focus on key stakeholders, this does not contradict its clear support for structured consultation and dialogue practices, as long as they are proportional and feasible. EOS explicitly supports structured stakeholder dialogue as an essential part of risk identification and mitigation, including practical recommendations and institutional engagement mechanisms.

In response to question7, EOS partially agrees, emphasizing the importance of developing action plans in consultation with affected stakeholders, especially when dealing with material risks. They suggest "comply or explain" approaches to ensure flexibility.

EOS at Federated Hermes supports stakeholder involvement in the development of action plans but rejects the legal obligation for this practice. The entity proposes that this process should be carried out flexibly, based on materiality and limited to stakeholders considered most directly relevant, favoring a "comply or explain" model instead of a clear regulatory requirement. This preference for voluntary approaches rather than mandatory legal requirements is inconsistent with the objective of indicator Q4.4, which calls for the compulsory consultation of stakeholders in action plan formulation. Although EOS acknowledges the importance of stakeholder dialogue, its opposition to the legal requirement for consultation in action plan development indicates a stance contrary to the core objective of the indicator.

Question 5: "Corporate directors should manage the human rights risks for the company in relation to stakeholders and their interests, including in the long run." Question 6: "We partially agree…" "Risk management should focus on material issues and key stakeholders." "Approaches like ‘comply or explain’ would be more effective than strict legal requirements."

EOS at Federated Hermes explicitly acknowledges that corporate directors have a responsibility in managing human rights risks, particularly concerning stakeholders and with a long-term focus. Conceptually, this aligns with the objective of indicator Q4.5. However, in Question 6, the entity opposes the introduction of a legal obligation and argues that these responsibilities should be guided by corporate governance principles, favoring approaches such as "comply or explain" and focusing on the materiality of risks and stakeholders. While EOS recognizes the importance of the issue and attributes a relevant role to directors in managing risks related to stakeholders, it does not support making this a legal requirement. The entity adopts an approach based on voluntary governance and proportionality.