Human Rights in EU Sustainable Finance

Abstract

In recent years, the European Union (EU) has adopted a broad range of sustainable finance-related legislation, including the Corporate Sustainability Due Diligence Directive (CSDDD), the Sustainable Finance Disclosures Regulation (SFDR), and the Corporate Sustainability Reporting Directive (CSRD). This legislation abounds with direct and indirect references to human rights and business and human rights (BHR) frameworks like the UN Guiding Principles on Business and Human Rights (UNGPs). They provide for BHR disclosure obligations and conduct obligations for investors and their portfolio entities. However, these references have largely been overlooked by both the BHR and financial law communities, leading to important gaps in how investors understand their BHR obligations and the efforts required to implement them. This article makes two contributions to understanding the integration of human rights in EU sustainable finance. First, it conducts a review of the extensive human right provisions in EU sustainable finance-related legislation, including the CSDDD, SFDR, Taxonomy Regulation, and CSRD. It also examines their mobilization of established administrative and sanction mechanisms to monitor and enforce compliance. Second, it highlights important challenges arising from this integration, particularly concerning coherence and terminology. Coherence challenges stem from conflicting interpretations between EU sustainable finance-related legislation, and between EU legislation and international human rights and BHR frameworks. Terminological challenges arise from different understandings of key concepts, such as ‘risk’, between the BHR and financial law communities. This article examines possible responses to these challenges.