Background

The EU’s Directive on Corporate Sustainability Due Diligence (“CS3D”) was published in the Official Journal of the EU on 5 July 2024 and requires businesses operating in the single market to identify, prevent, mitigate and account for their adverse human rights and environmental impacts in their value chain, while also requiring that firms have adequate governance, management systems and measures in place to this end.

Scope

CS3D is unlikely to apply to most AIMA members. It applies to financial services entities in relation to their upstream business partner activities only and in so far as they meet either of the following criteria:

1. An EU company with more than 1,000 employees and with a worldwide turnover greater than €450 million.
2. A non-EU company with EU turnover greater than €450 million.

CS3D does not apply to AIFs or UCITS. The review clause which would have required the European Commission to review the application of the Directive to include financial services firms’ downstream financial services and investment activities was removed by the European Commission’s Omnibus I proposal in February 2025.

Requirements of note

The requirements on Climate Transition Plan in CS3D are subject to a further amendment by the Omnibus. The phrasing previously in CS3D that entities should “put into effect” Climate Transition Plans has been replaced by entities having to have “implementing actions” with regard to their Plans. This is designed to align more closely with the obligations under CSRD, where entities are required to disclose a transition plan for climate change mitigation as part of obligations under ESRS E1-1 and provide an explanation of their progress in implementing the plan.

Please contact Adam Jacobs-Dean or Thomas Sharpe with any questions regarding these proposals.

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  Adam Jacobs-Dean

  Managing Director, Global Head of Markets, Governance and Innovation

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  Thomas Sharpe

  Associate Director, Markets, Governance and Innovation