Institutional Investors and Sustainability - An Analysis of Institutional Investors’ Legal Due Diligence Obligations

Sammanfattning: The European Union’s Sustainable Finance Agenda has launched several new actions in order to reorient capital flow of the financial market to sustainability objectives. One of these initiatives was to unify and harmonize the rules on marketing of sustainable aims of financial products. Financial Market Participant, including institutional investors, are obligated to disclose their due diligence polices under article 4 of the Sustainable Finance Disclosure Regulation. However, the regulation itself is unclear on the contour of this duty but some details are laid down in other EU legislative acts. Human Rights due diligence is a paramount tool for institutional investors to fully comprehend and manage risks associated with social sustainability. The primary soft law instruments available on the global arena specifically addressing due diligence are the Organization for Economic Co-operation and Development’s Guidelines for Multinational Enterprises and the United Nations Guiding Principles on Business and Human Rights. The former of which has produced additional practical recommendations expressly dedicated to the due diligence process for institutional investors. Treaties from the International Labor Organization, national legal developments and privately initiated schemes can provide clarity in the jungle of legal framework. Due to limited scope or jurisdictional boundaries these have a restricted impact.