The EU Platform on Sustainable Finance’s Final Report on Minimum Safeguards

21 October 2022
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Key takeaways:
  • The European Commission’s Platform on Sustainable Finance, an expert group established to assist with the development of the EU’s sustainable finance policies, recently published its Final Report on Minimum Safeguards under the EU Taxonomy Regulation. The Report sets out the checks for firms to determine whether their investee companies have in place “minimum safeguards” in relation to human rights, employment rights, anti-bribery, taxation and fair competition.
  • Whilst the checks described in the Report form part of the process for qualifying an investment under the Taxonomy Regulation as taxonomy aligned, the practical impact of the report is likely to be wider - the Report’s standards are general criteria for due diligence on human rights and best business practices, and there is significant overlap between the concept of “Minimum Safeguards” in the Report and the concept of “good governance” in the definition of sustainable investment and some sustainability requirements for funds classified under Article 8 and 9 of the EU Sustainable Finance Disclosure Regulation.
  • The Report draws a direct line to the pending Corporate Sustainability Due Diligence Directive (CSDDD) and the pending Corporate Sustainability Reporting Directive (CSRD): portfolio companies complying with the CSDDD Directive will be deemed to comply with the Minimum Safeguards and companies being subject to the strict reporting standards under the CSRD will provide the basis and make it easier to verify their Minimum Safeguard compliance.
  • While the Report recognizes different scale of checks depending on the size of the company, but generally sets a high bar for the international standards to be met.
  • This client note describes the criteria to be met for the Minimum Safeguards and hence the checks required for a fund which commits to be taxonomy aligned and/or to make sustainable investments.