Due diligence describes the processes investors use to systematically identify and mitigate sustainability risks.
Investors need to be able to identify whether the assets or companies they are investing in will have any negative impact on people and the planet and then mitigate that impact. Investors have very sophisticated systems for managing and mitigating financial risk - now they need to do the same for sustainability risks.
While an ever-increasing group of mainstream investors is integrating sustainability within their internal decision-making, too many others are failing to do so.
The EU has recently proposed a Regulation on Disclosures of Sustainability Risks which has been amended by the European Parliament rapporteur to include requirements on investors to carry out due diligence as part of their risk management systems.
This is a historic opportunity for the EU to show leadership on ensuring investors play an active role in tackling today’s vast sustainability challenges from climate change to environmental defenders.
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