• Atmospheric CO2 /Parts per Million /Annual Averages /Data Source: noaa.gov

  • 1980338.91ppm

  • 1981340.11ppm

  • 1982340.86ppm

  • 1983342.53ppm

  • 1984344.07ppm

  • 1985345.54ppm

  • 1986346.97ppm

  • 1987348.68ppm

  • 1988351.16ppm

  • 1989352.78ppm

  • 1990354.05ppm

  • 1991355.39ppm

  • 1992356.1ppm

  • 1993356.83ppm

  • 1994358.33ppm

  • 1995360.18ppm

  • 1996361.93ppm

  • 1997363.04ppm

  • 1998365.7ppm

  • 1999367.8ppm

  • 2000368.97ppm

  • 2001370.57ppm

  • 2002372.59ppm

  • 2003375.14ppm

  • 2004376.96ppm

  • 2005378.97ppm

  • 2006381.13ppm

  • 2007382.9ppm

  • 2008385.01ppm

  • 2009386.5ppm

  • 2010388.76ppm

  • 2011390.63ppm

  • 2012392.65ppm

  • 2013395.39ppm

  • 2014397.34ppm

  • 2015399.65ppm

  • 2016403.09ppm

  • 2017405.22ppm

  • 2018407.62ppm

  • 2019410.07ppm

  • 2020412.44ppm

  • 2021414.72ppm

  • 2022418.56ppm

  • 2023421.08ppm

News & Views

Due diligence laws divide financial firms

Part III of NZI’s Putting a Price on Pollution series looks at the complications around extending environment-focused due diligence laws to financial firms

Making financial firms legally liable for pollution in their value chains is often touted as an effective means to change destructive behaviours.

If fund managers and bankers are on the hook for pollutant activities, then surely they will think twice about who and what they invest in and finance.

The costs of fines and lawsuits would play a powerful role in pricing in the negative externalities of carbon emissions and economic activities that harm biodiversity.

It should therefore come as a relief to environmentalists that the EU has begun work implementing its ostensibly game-changing Corporate Sustainability Due Diligence Directive (CSDDD).

Under CSDDD, companies are required to conduct human rights and environmental due diligence across the whole of their business (including any subsidiaries) and any value chains which are, or are expected to be, “lasting”.

Meanwhile, the more targeted deforestation regulation, prohibits the placing on the EU market of certain products if they are not produced according to the local law in producing countries, or if they have led to deforestation or forest degradation.


If fund managers and bankers are on the hook for pollutant activities, then surely they will think twice about who and what they invest in and finance.


Traders and operators placing products on the EU market, including soy, palm oil, cocoa, beef, coffee or timber, have to assure traceability to plot level, and must have proof of compliance to these new requirements.

Similarly, the UK’s Environmental Act includes provisions to tackle the use of illegally-produced “forest risk” commodities in UK supply chains.

However, significant industry and member-state pushback has meant that financial firms are likely to be offered a certain degree of relief from these measures.

No direct control

The main argument is that financial firms have no direct influence or controls over the companies they finance or invest in. A due diligence directive that captures a financial firm’s value stream in its entirety would be “disproportionate”.

Although AFME, ISDA, FIA and EPIF support the inclusion of financial institutions’ upstream supply chain within the scope of the directive (albeit with various ifs and buts), the associations oppose the inclusion of downstream business relationships.

“The downstream value chain of financial institutions can be made up of many thousands of companies and counterparties, operating across different sectors and jurisdictions, as recipients of a broad range of products and services where the indirect links with companies’ impacts on the environment and human rights are more or less relevant,” the association said in a joint statement.

An overly broad approach would risk “creating unworkable, disproportionate and ineffective legislation” and “adversely impact companies’ access to financial services, increase costs and potentially disrupt markets where it is not possible to comply with the requirements”.

Bolstering corporate accountability

As Net Zero Investor revealed in its lobbying activities article last week, when it comes to pricing pollution into markets, the major finance associations tend to oppose more ambitious policymaking.

However, CSDDD has even drawn criticism from more progressive financial firms, such as Brunel Pension Partnership.

Faith Ward, chief responsible investment officer for Brunel Pension Partnership and chair of the Institutional Investors Group on Climate Change (IIGCC), agreed in principle with bolstering corporate accountability for human rights and the environment, but stressed the complications and unintended consequences of applying due diligence laws in their current form to financial firms.

“We have in the region of 3500 listed equities on our portfolios, so where would you like me to start?” she asked. “We can’t possibly do due diligence on all of them and their supply chains."

Moreover, investors will use "a wide range of products such as indexes and other passive investments where you are not ‘selecting investments’ as such and where they are deliberately highly diversified such as ETFs or derivative-based investments. Any requirements would need to ensure investors were treated fairly and were proportionate," Ward said.


We have in the region of 3500 listed equities on our portfolios, so where would you like me to start?

Faith Ward, Brunel Pension Partnership

Instead of supporting the CSDDD in its current form, Ward advocates for a more focused approach that would make funds prioritise a small proportion of their portfolios.

Otherwise the risk is that valuable resource gets eaten away on time-consuming analysis without meaningful action or engagement.

“As a pension fund, you’re invested in thousands of companies and have no direct control over their supply chains, any requirements need to reflect that” she added.

BlackRock's viewpoint

Meanwhile, investment giant BlackRock argued that CSDDD should appropriately take into account differences between asset managers investing on behalf of long-term asset owners in companies and the companies themselves, with direct control over their own value chains.

“While asset managers can, and do, engage with companies on their management of human rights, environmental impacts and other issues in their value chains, responsibility for these business practices lies with the boards and the management of companies themselves,” the firm said in a statement.

In December last year, after a flurry of last-minute negotiations among member states, EU ministers agreed on a common negotiating position for the CSDDD, making the inclusion of the financial services in the scope of due diligence requirements optional for member states.

This was largely due to France, Italy, Spain, and Slovakia threatening to form a blocking minority in case the text would not be changed, according to reports by EURACTIV.

The EU parliament is still deciding its position.

A mixed advocacy landscape

While the argument for limiting the scope of CSDDD may be winning support among lawmakers, doing so risks opening up significant loopholes in the context of globalised financial centres and markets.

“An EU-domiciled bank that finances, say, a Malaysian company that is involved in illegal deforestation will essentially get off scot free if the carve out goes ahead, ” Simon Zadek, executive director at Nature Finance, told Net Zero Investor.

However, not all financial firms are opposed. In addition to activist sustainability players such as Triodos, Eticasgr, and ASN Bank, all of which have told Net Zero Investor that they are pushing for the full scope of CSDDD, the Dutch Banking Association has also voiced its support.

Interestingly, the deforestation regulations have actually attracted fiercer lobbying activity, according to Triodos Bank.

Carlijn Kamp, program officer for the chief economist at Triodos Bank, attributed the discrepancy to the fact that CSDDD is a process-related legislation whereas the deforestation regulation is product focused, forbidding non-compliant products, and will, therefore, have a sharper impact.

“We already have such rules for conflict minerals and single use plastics, and they can be very effective,” she said. “Due diligence laws are more about your process, how you deal with and respond to supply chain issues.”

Kamp also offered a general rule for lobbying in the sustainability space. “When a certain law receives a lot of attention, it becomes more difficult for policymakers to be ambitious,” she said.


When the law is less public, it’s easier for conservative politicians to come aboard.

Carlijn Kamp, Triodos Bank

Although the CSDDD and deforestation discussions haven’t been finalised yet, it looks likely that financial firms will be excluded from at least some of the requirements.

Extraterritorial complications

One unintended consequence of the EU’s deforestation regulation is a growing conflict between Brazil and Brussels. Brazil’s argument is that Brussels has no right to set laws in Brazil and that the new requirements are tantamount to a non-tariff trade barrier.

“The key lesson here is not that policymakers are opposed to pricing pollution into global markets, but that such measures, whether they come through due diligence mechanisms, taxes, or other means, can have a negative impact on more vulnerable communities or countries,” said Zadek.

Having the Brussels-Brazil deforestation dispute end up in the World Trade Organisation is certainly no way of building solidarity with nature intensive countries and wealthier OECD countries, Zadek continued.

The biodiversity and climate crises are global problems which need global solutions, and measures which undermine international solidarity, however well-intended, may create more problems than they solve.

Nature Finance’s solution is to change the wording of the due diligence mechanism from “zero deforestation” to “nature crime”.

“The Brazilian government has a right to consider certain forms of deforestation acceptable,” Zadek concluded.

“However, the vast majority of deforestation is illegal. By changing the wording, Brussels can actually help Brazil enforce its own laws as opposed to imposing restrictions on another sovereign state.”

Next week’s instalment of Net Zero Investor’s Putting a Price on Pollution series looks more closely at “short-termism” in the political economy that often prevents policymakers from adopting a more ambitious stance.

CSDDD, which looks set to allow for the exclusion of the financial sector following the interventions of member states, is but one front of a many-sided policy battle in which short-termism plays a key role.

More in this series:

Part I: Seven reasons why policymakers aren’t accelerating the green transition

Part II: Global firms call for transition pathways and carbon tax

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