Principles for Responsible Investment

The entity welcomes the proposed directive and its advocates for an appropriate and practicable inclusion of the financial sector.

The entity states that: 'PRI welcomes the proposed Corporate Sustainability Due Diligence Directive (CSDDD) and supports the appropriate and practicable inclusion of the financial sector.' It adds the following: 'to be clear, achievable and proportionate, the due diligence requirements for the financial sector under the CSDDD must complement and reinforce existing obligations. Co-legislators should adopt proportionate requirements for ongoing due diligence throughout the value chain, using a risk-based approach in line with international standards.'

The entity is in favour of legal framework on due diligence, although it does not explicitly refer to continuous improvement or disclosure.

The entity considers that a legal requirement for due diligence is needed (question 2). It adds that: 'we recommend the EU establish a legal duty for companies to undertake due diligence. Research shows that, almost ten years after their formulation, these standards OECD Guidelines for MNEs have been only sporadically adopted by companies'. It also states that 'we recommend that the EU legal framework on supply chain due diligence builds on internation standards to ensure alignement ....'.

In a public joint letter with Institutional Investors Group on Climate Change (IIGCC), Eurosif - European Sustainable Investment Forum, Interfaith Center on Corporate Responsibility (ICCR) and Investor Alliance for Human Rights (IAHR), the Principles for Responsible Investment (PRI) The group expresses unequivocal support for the mandatory due diligence on human rights and sustainability, emphasizing that the directive is aligned with international standards and will provide legal certainty for companies and investors

The group states 'We reiterate our support for the agreement... on the Corporate Sustainability Due Diligence Directive (CSDDD).”“The CSDDD offers a unique opportunity to establish a level playing field...”“This is in line with international standards, notably the OECD Guidelines... and UN Guiding Principles…'

The entity considers that the scope of the proposal is insufficient and calls for including all businesses operating in the EU, regardless of sector or size.

In a statement in reaction to the proposal for a CSDD Directive, it states that ' the PRI called on the Commission to introduce a mandatory due diligence proposal which included all businesses operating in the EU, regardless of sector or size. The limited scope of the Commission’s proposal is insufficient and could pose risks and challenges for investors, particularly in private markets, when it comes to managing their exposure to sustainability issues'.

The entity is in favour of a due diligence approach that includes all sectors. Regarding SMEs, it is in favour of detailed non-binding guidelines catering for their needs.

The entity advocates (question 15) for a minimum process and definitions approach which should be applicable across all sectors (with further requirements for environmental issues). In relation to SMEs, it does not exclude them from the legislation's scope and is in favour of providing, 'detailed non-binding guidelines catering for the needs of SMEs in particular.' In addition, the entity emphasises the importance of including the finance sector under the scope of the legislation and suggests using the existing European Commission's guidance for SMEs on human rights.

In a joint public letter with Institutional Investors Group on Climate Change (IIGCC), Eurosif - European Sustainable Investment Forum, Interfaith Center on Corporate Responsibility (ICCR), Investor Alliance for Human Rights (IAHR), the Principles for Responsible Investment (PRI) acknowledges the need for specific measures to protect SMEs, without indicating a position on their exclusion from the general scope of the directive.

The statement indicates: “The CSDDD also includes clear mechanisms to ensure that SMEs are protected from any indirect effects...”“In-scope companies are required to provide targeted and proportionate support to SMEs…”

The entity is in favour of judicial enforcement with liability and compensation in case of harm caused, indicating that an appropriate accountability and enforcement mechanism is essential to ensure compliance with this legislation.

In relation to enforcement mechanisms (question 19a) the entity advocates for: 'Judicial enforcement with liability and compensation in case of harm caused by not fulfilling the due diligence obligations.' It added that: 'An appropriate accountability and enforcement mechanism is essential to ensure compliance with proposed legislation. This should accompany disclosure through the NFRD. ... The mandate for enforcement must be given to the most suitable authority. Supervisory functions – such as the National Contact Points (NCP) of the OECD – have limited merit and capacity in successful enforcement. We would therefore look favourably on a judicial enforcement regime with liability and compensation subject to a proper examination of learnings from similar national approaches. The need to provide access to remedy for people subject to harm from corporate activities should be given due weight in these considerations.'

In a public joint letter with Institutional Investors Group on Climate Change (IIGCC), Eurosif - European Sustainable Investment Forum, Interfaith Center on Corporate Responsibility (ICCR), Investor Alliance for Human Rights (IAHR), the Principles for Responsible Investment (PRI) indicates support for the existence of a civil liability regime as an enforcement mechanism

The statement indicates '“The civil liability regime clarifies that requirements are an obligation of means, not results, giving companies legal certainty.” By stating that the regime is an "obligation of means" (rather than results), the group reinforces the clarity and reasonableness of the enforcement framework.

The entity supports embedding stakeholder-aligned sustainability duties into EU company law and recommends clarifying and strengthening directors' responsibilities

The entity states that 'The entity states that ‘Currently, there is no explicit duty in EU law for directors to generally act in accordance with the company’s long-term interests, shareholders’ views or to incorporate stakeholder interests. …. Therefore, the CSDD presents a significant opportunity for harmonised and strong duties throughout the EU. However, compared to the Commission’s initial impact assessment, the coverage of director’s duties in this proposal is extremely limited. Furthermore, while we welcome the intention with regards to directors’ duty of care and oversight of due diligence processes, the language used in Articles 15, 25 and 26 does not provide sufficiently clear direction to lead to strong, harmonised duties throughout the EU’.

The Company agrees to some extent to requiring directors to set up procedures and, where relevant, targets, to ensure possible risks and adverse impacts on stakeholders are identified, prevented and addressed.

In its explanation on the enforcement mechanisms, (question 19a) the entity refers to the need of providing access to remedy for people subject to harm. Specifically, on director's duty to establish procedures and, where relevant, targets to ensure adverse impacts are identified, prevented and addressed, it states that it agrees to some extent (question 7). Although it provides comments to this question, they focus mainly on targets.

Despite not being directly asked, the entity explicitly advocates for providing remedy for human rights and impacts caused or contributed to.

Asked about the due diligence duty definition (question 14) the entity considers that, 'the responsibility to provide access to remedy should be included'. In response to question 19a, on enforcement mechanisms, the entity advocates for, 'judicial enforcement with liability and compensation in case of harm caused by not fulfilling the due diligence obligations'. It also states that: 'the need to provide access to remedy for people subject to harm from corporate activities should be given due weight in these considerations.'

Although this is not directly asked, the entity agrees with the defintion of due diligence duty, which accounts for human rights impacts both in its own operations and the supply chain, subject to some considerations, including providing access to remedy.

The entity agrees with the definition of due diligence duty, subject to technical considerations that include, 'the responsibility to provide access to remedy should be included'. The definition refers to having processes to account for human rights both in companies' own operations and supply chains - including impacts within scope that are caused or contributed to by the company.

Although the entity is in favour of establishing mechanisms for dialogue with all stakeholders to understand and respond to their views and concerns, it does not refer to grievance mechanisms.

The Company did not respond to question related to the inclusion of a complaint mechanism as part of due diligence (question 20c). However, it agrees to some extent that the EU should require directors to establish mechanisms for engaging with stakeholders in this area (due diligence duty). It points out that: 'Introducing a formal mechanism to channel stakeholder views and concerns across global operations will strengthen the voice of stakeholders in the boardroom and the likelihood of incorporation of their input into strategic and operational business decisions. Such mechanisms for two-way dialogues will provide an avenue for companies to understand and respond to legitimate stakeholder views and concerns.'

The Company is in favour of this and considers it essential to ensure compliance with the legislation.

In response to question 19a, on enforcement mechanisms, the entity advocates for: 'judicial enforcement with liability and compensation in case of harm caused by not fulfilling the due diligence obligations.' It also states that: 'An appropriate accountability and enforcement mechanism is essential to ensure compliance with proposed legislation. This should accompany disclosure through the NFRD ... The mandate for enforcement must be given to the most suitable authority.'

In a public joint letter within Institutional Investors Group on Climate Change (IIGCC), Eurosif - European Sustainable Investment Forum, Interfaith Center on Corporate Responsibility (ICCR), Investor Alliance for Human Rights (IAHR), the Principles for Responsible Investment (PRI) indicates civil liability regime as part of the directive

The statement indicates “The civil liability regime clarifies that requirements are an obligation of means…”

The entity advocates for including the whole value chain, and SMEs, particularly for client entites in financial services.

It states that ' Under the CSDD proposal, financial undertakings are only obliged to carry out due diligence assessments before providing a financial service. In addition, this pre-service assessment only considers the activities of the clients receiving the investment ... meaning there are no value chain due diligence obligations. Furthermore, this pre-service provisioni due diligence obligation does not include SMEs receiving the financial service'. 'PRI recommends co-legislators amend the due diligence obligations for financial undertakings to include ongoing assessments and which cover the entire value chain'. Outside the financial companies scope, the entity also considers value chain as the adequate coverage ('the proposal will support investor’s sustainability assessments; enhance risk analysis and processes for impact prevention, mitigation and remediation; and provide greater understanding of those companies within scope of the CSDD including throughout the value chain').

The Company agrees with the due diligence definition and considers that it should include remedy and the whole value chain.

The Company advocates for a due diligence duty following a minimum process and definitions approach, considering all sectors (and complemented with environmental requirements) as per question 15. It agrees with the definition of due diligence duty provided in question 14, 'subject to technical considerations'. These considerations include: 'the legislation should explicitly refer to value chains rather than supply chains which also covers customers and downstream relationships'; 'the responsibility to provide access to remedy should be included.'

The entity supports stronstakeholder identification and calls for removing the phrase “where relevant” to ensure companies systematically identify and consult affected stakeholders.

the entity states that 'Article 6, paragraph 4 of the CSDD proposal states “companies shall, where relevant, … carry out consultations with .... The inclusion of “where relevant” contradicts UNGP 18 .. PRI recommends co-legislators remove “where relevant” in this sentence and provide guidance, aligned with international standards, for how companies can ensure the dialogue is meaningful.

The entity agrees to some extent to this requirement and elaborates its opinion, aligning with the indicator requirements.

The entity agrees to some extent to question 20a that directly asks this. It adds that: 'It is reasonable for companies to have flexibility to select the appropriate mechanism based on individual characteristics such as board size and structure as well as strategic priorities ... Introducing a formal mechanism to channel stakeholder views and concerns across global operations will strengthen the voice of stakeholders in the boardroom and the likelihood of incorporation of their input into strategic and operational business decisions. Such mechanisms for two-way dialogues will provide an avenue for companies to understand and respond to legitimate stakeholder views and concerns.'

The entity advocates for mandate stakeholder engagement when identifying actual and potential adverse impacts.

Specifically, it states that: 'Article 6, paragraph 4 of the CSDD proposal states “companies shall, where relevant, … carry out consultations with potentially affected groups including workers and other relevant stakeholders to gather information on actual or potential adverse impacts”. The inclusion of “where relevant” contradicts UNGP 18, which states that this process “should always involve meaningful consultation with potentially affected groups and other relevant stakeholders, as appropriate to the size of the business enterprise and the nature and context of the operation”. PRI recommends co-legislators remove “where relevant” in this sentence and provide guidance, aligned with international standards, for how companies can ensure the dialogue is meaningful.'