Powerful lobbying has quietly exempted finance from an EU sustainability law, risking Europe’s environmental and human rights commitments.
Omnibuses appear to be the European Commission’s preferred vehicles of choice this year. These are not modes of passenger transport, but legislative packages capable of amending multiple EU laws in a single process. Five such omnibuses have been announced for 2025, with the first released at the end of February. The first votes in the European Parliament will happen on the 1st of April. The first omnibus package targets significant cutbacks to sustainability regulation, specifically affecting the Taxonomy for sustainable investments, rules around sustainability reporting (CSRD), and supply chain due diligence legislation (CSDDD). Although presented by the Commission as simplification, the proposals represent substantial deregulation that risks undermining Europe’s socio-ecological transition.
The most radical cuts proposed affect the CSDDD, notably trimming the definition of supply chains to include only direct suppliers. This change could fundamentally undermine the concept of corporate responsibility throughout supply chains. Additionally, the liability provisions are significantly weakened, and the Commission has proposed entirely removing a review clause designed to reassess the controversial exemption of the financial sector two years after the directive’s implementation. In essence, this omnibus aims at permanently shielding financial institutions from accountability for the environmental and human rights impacts of their investments.
The exemption for financial institutions is a striking illustration of lobbying influence at the EU level, highlighting how powerful special interests can sway policymakers. Given the Commission’s heavy reliance on lobby group input for the omnibus package and preferential consultation access granted to corporate representatives, scrutinising the CSDDD lobbying success is vital to avoiding similar mistakes today.
The CSDDD was originally conceived to hold large companies accountable for human rights abuses and environmental harm throughout their supply chains. The initial proposal from February 2022 explicitly included the financial sector, recognising finance’s significant leverage over corporate behaviour. This measure aimed to prevent banks and investors from financing harmful business practices by requiring them to undertake due diligence on companies they support.
However, finance industry lobby groups were divided. While the Dutch Banking Association strongly supported inclusion, the European Banking Federation (EBF), representing banks across the EU, accepted due diligence obligations only for corporate lending, excluding household loans. Other groups opposed including financial institutions altogether. Despite this, the European Parliament maintained finance-sector inclusion, albeit limited to corporate clients.
A significant opponent at the time was the US asset management giant Blackrock, which pushed for the asset management industry’s exclusion, arguing that investment firms lack direct relationships with investee companies and thus should not be held accountable. France reportedly backed this stance, leading to a Council compromise excluding asset managers—dubbed the “Blackrock exemption”—though banks and insurers initially remained included.
Subsequently, France, supported by several other member states, succeeded in nearly excluding the financial sector entirely, despite opposition from Germany and the Netherlands. The crucial manoeuvre was shifting the directive’s scope from downstream activities (such as investments and lending) to upstream activities (like suppliers and raw materials). For financial institutions, “upstream” largely translates to office supplies, thus effectively exempting their core business activities. This was only the Council’s position, as the European Parliament retained finance within its scope.
The 2023 trilogue negotiations between the Commission, Parliament, and Council shaped the final text of the EU supply chain law. Major lobby groups, such as the Association for Financial Markets in Europe (AFME) and the German Insurance Association (GDV), campaigned vigorously during this phase to essentially uphold the Council’s exclusion of the financial sector. They succeeded: the final agreement excludes core financial activities, such as lending, from CSDDD requirements. A review clause allowing reassessment after two years remained the only concession.
The exclusion of financial institutions from the CSDDD is a glaring example of how special interests can override elected representatives and member states. The current omnibus proposal reopening the CSDDD offers a chance to reverse this unjustified carve-out. Yet, likely swayed by influential lobbyists and its drive to achieve bureaucratic simplification targets, the Commission instead proposes deleting the review clause altogether, thereby cementing past lobbying victories.
It is now up to EU legislators to resist this wave of deregulation, which threatens Europe’s sustainability transition. Lawmakers have considerable support from numerous companies—including from both the real economy and the financial sector—who oppose the Commission’s drastic proposals. Rather than streamlining and harmonising sustainability rules, these plans risk discarding valuable regulations prematurely, precisely when parts of the existing framework have scarcely been implemented.
During earlier negotiations, the European Parliament was overridden by the Council’s lobby-driven stance excluding finance. Now, Members of the European Parliament must stand firm against deregulation and seize this opportunity to restore fairness by ending this exemption. Financial institutions should be held to the same standards as other businesses regarding their responsibility for human rights violations and environmental harm.
Magdalena Senn is an economist specialising in macroeconomics and political economy. She works as a policy expert at Finanzwende on sustainable financial markets, focusing on how financial markets can support the transformation to a future-proof economy.