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France has secured a partial carve-out for banks from new EU rules to make companies responsible for environmental impacts in their supply chains.
Paris also won, in separate negotiations, assurance that state-backed funding for its nuclear power plants will be possible under a reform of the EU electricity market, the culmination of a concerted effort to champion the low-carbon fuel in the face of opposition from Luxembourg, Austria and Germany.
Agnès Pannier-Runacher, French energy minister, hailed the decision as “excellent news”. “It gives us the means to ensure long-term financing for the transformation of our electricity system,” she said.
The EU due diligence law agreed on Thursday will force companies with more than 500 employees and €150mn in revenue to report and take measures to impede worker exploitation, deforestation and pollution in their supply chains. Civil society groups will have the ability to take businesses to court for non-compliance with the rules.
France, backed by countries including Italy and the Czech Republic, has succeeded in making sure that banks, asset managers and investment groups will only have to report on upstream activities such as purchasing office equipment.
They will not have to initiate due diligence on the activities of clients to whom they are offering loans — something that the European parliament had pushed for in the talks.
In a note circulated among negotiators earlier this month, the European Central Bank also warned that “excluding the financial sector would be counterproductive to the intention of the [law], as it would allow the EU financial sector to continue to fund activities detrimental to the EU [environmental and social governance] agenda”.
Arianne Griffith, corporate accountability guide at the NGO Global Witness, said that it was “shocking” that EU countries had “sunk plans to ensure that banks stop investing in environmental and human rights abuses”.
Eelco Van der Enden, chief executive of the Global Reporting Initiative, said that it was “disheartening” to see that the French effort had watered down the application of the rules to the financial sector but that a review clause in the agreement could offer the opportunity to include them at a later stage.
Banks with more than 500 employees will, however, have to draw up and carry out climate transition plans to show what they are doing to mitigate their impact on global warming.
Richard Gardiner, head of EU policy at the World Benchmarking Alliance, said that “the significant upside” of the law was the obligation for banks to adopt and carry out a “meaningful transition strategize”, overriding current voluntary pledges to bring carbon emissions to zero.
Both the energy market reform and the due diligence rules must be formally approved by the European parliament and member states in votes due to take place early next year. Once the due diligence directive is approved, EU governments will have two years to present the rules in national legislation.
