EU financial institutions to report on due diligence for responsible business conduct in line with OECD guidance.
In April 2019 the European Parliament overwhelmingly approved an EU Regulation for Sustainability-related Disclosures in the Financial Services Sector. The Regulation is the second legislative agreement reached under the EU Sustainable Finance Action Plan.
In calling on financial institutions to disclose sustainability risks and impacts, the Regulation represents a milestone in efforts to encourage financial institutions to take into account impacts to society and the environment.
The Regulation introduces transparency rules for financial institutions on the integration of sustainability risks and impacts in their processes and financial products, including reporting on adherence to internationally recognised standards for due diligence.
It also notes that when reporting on due diligence, practitioners “should consider the due diligence guidance for responsible business conduct developed by the Organisation for Economic Cooperation and Development.” (The OECD Guidelines)
In 2017 the OECD published guidance on Responsible business conduct for institutional investors which lays out due diligence approaches for asset owners and investment managers to identify and respond to environmental and social risk in their portfolios. It has been formally approved by 48 governments.