A leaked memo reveals that finance may be excluded from EU climate legislation, sparking concerns that it may not be able to be effectively enforced.

A confidential document obtained by The Associated Press shows that a leading EU regulation designed to encourage European businesses to achieve net zero emissions may be significantly diluted by member states. This potentially means that companies will no longer be obligated to uphold the goals of the Paris Agreement.

The Corporate Sustainability Due Diligence Directive was created to ensure that companies eliminate any violations of environmental and human rights across all aspects of their operations. This legislation aims to align firms’ practices with the global goal of limiting the rise in temperatures to no more than 1.5 degrees Celsius (2.7 Fahrenheit).

A document from a Nov. 9 meeting, obtained by The AP, outlines a diluted suggestion to exclude the entire financial industry from the initial legislation.

European banks and insurance companies play a significant role in contributing to global warming through their funding and insuring of new oil and gas projects, as well as agribusinesses that engage in deforestation of tropical rainforests. Nonprofits have expressed concerns that the proposed regulation would only require companies to have plans for reducing carbon emissions, rather than actually achieving them, which could lead to deceptive practices known as “greenwashing.”

Environmentalists praised the law when it was revealed. However, there is currently a disagreement over the last version of the text between the European Parliament, which advocates for strict regulations, and the Council of the European Union, comprised of ministers from all 27 member nations.

Several of the latter group desire less burdensome terms, concerned about the consequences of strict regulations on their economies.

The current holder of the council’s presidency is Spain, and they are working towards achieving consensus among all member states regarding their preferred version of the law. Their effort to overcome the deadlock was outlined in a confidential briefing.

The suggested regulations for the financial industry have resulted in challenges in reaching a mutually agreeable solution with the European Parliament. In order to address this, the Presidency suggests potentially excluding the financial sector and postponing its inclusion until a later time.

Campaigners were taken aback by this news, as they caution that if it’s delayed indefinitely, the addition of finance may never come to fruition. The upcoming European elections are scheduled for June 2024, and there is a widespread belief that after that, there will be no opportunity to include it.

The European Union is aiming to achieve climate neutrality by 2050 and has implemented various strategies such as decreasing energy usage, significantly reducing transportation emissions, and revising the EU’s trading system for greenhouse gases. However, with elections approaching, there are concerns among certain leaders and legislators about potentially alienating voters through mandatory laws and strict regulations.

As of October, the council suggested implementing laws for the financial industry that individual countries could choose to follow or not.

Richard Gardiner, the leader of EU policy at the World Benchmarking Alliance, a Dutch non-profit organization that evaluates the sustainability of worldwide businesses, described the current strategy as a significant setback in the progress that has been achieved.

Excluding finance also means excluding a significant catalyst of change, according to the speaker. He also noted that this decision goes against the beliefs of the majority in the EU parliament, Commission, and most member states. He raised concerns about the overwhelming influence of larger countries who are willing to cater to the demands of the financial sector’s lobbying efforts.

In a telephone conversation, René Repasi, the primary negotiator for the financial aspects of the law, stated that finance is the driving force behind the global economy and intimately tied to the environment.

The responsibility for the change was placed on France, but the speaker has not heard a compelling explanation for their actions. According to the speaker, all member states had previously agreed on a financial deal, but France unexpectedly announced they would veto it at the last minute.

He stated that France is the main driving force.

A November document created by French officials, obtained by The AP, suggests eliminating requirements for the financial industry to address environmental damage caused by its funding activities. Additionally, minutes from an EU meeting in October, also obtained by AP, reveal that France opposed the proposal and all potential options related to finance.

A member of the French negotiating team stated over the phone, “France agrees with excluding the financial sector from the scope of the directive.”

“France advocates for several measures that strengthen the responsibilities of the financial industry within the scope of this directive.”

Alban Grosdidier, from Friends of the Earth Europe, stated that corporations bear the brunt of emissions that contribute to climate destruction. He cautioned that the suggested modifications would significantly weaken the effectiveness of the new legislation.

Grosdidier stated that the modifications would render a clause regarding companies’ adherence to the Paris Agreement ineffective. The European Parliament aims for member states to enforce a plan that would restrict global warming to 1.5 C above pre-industrial levels. However, the council’s preferred version would only require companies to “adopt a plan” in line with the Paris Agreement, along with taking some actions.

Campaigners argue that there is a desire to revise the implementation of the bill in order to clarify that countries are only required to monitor if plans have been “adopted.” This suggests that the plans may not necessarily have to be fulfilled.

According to nonprofit organizations, the recently leaked briefing reveals that the EU Presidency is now leaning towards less stringent regulations. As a potential resolution to the issue, the briefing suggests that companies should demonstrate a commitment to aligning with the Paris Agreement.

According to Marion Lupin, a lawyer and policy officer at the European Coalition for Corporate Justice, using the phrase “obligation of results” would have had a more forceful legal impact.

According to Romain Hubert, a research fellow at the Institute for Climate Economics in Paris, the use of the term “obligation of means” implies that companies are only required to have a plan for complying with the Paris Agreement, rather than actually carrying out that plan.

According to Grosdidier of Friends of the Earth, the proposed changes could potentially have the opposite effect and actually be counterproductive. This is because if a plan is adopted without a requirement to follow through, it could give companies a “greenwash” license.

A representative for the current Spanish leadership of the EU Council refused to provide a statement.

Representatives from member nations will convene on Wednesday to deliberate the latest suggestions. Should they reach a consensus, these suggestions will serve as the foundation for the ultimate negotiations with the European Parliament. Once all parties have reached a compromise, it must receive formal approval from both the parliament and council in order to be enacted as a law for the approximately 450 million people in the bloc.


The Associated Press receives funding from various private foundations for its coverage of climate and environmental topics. Learn more about AP’s climate initiative here. The AP is solely responsible for the content it produces.

Source: wral.com