Sustainability and Sustainable Finance: A Regulator’s Perspective and Beyond

Abstract

The integration of environmental, social, and corporate governance factors in business models and conduct and in financial services is getting increasingly important in face of dramatic environmental and social problems calling for an urgent response. However, public funds are insufficient to finance the transition to a more sustainable economy and society. The business sector and the financial system play therefore a key role in the transition. But the credibility of sustainable finance and the trust and confidence of those looking for sustainable investment options strongly relies upon the existence of appropriate regulation and supervision. Therefore, the crucial contribution of the private business sector and the financial system for the sustainable transition implies a similar involvement and contribution from regulators and supervisors. Regulation and standard setting must speed up in identifying the gaps in the existing frameworks and in providing investors and the industry with appropriate, bespoken concepts and instruments to address the sustainable finance challenges, risks, and opportunities. The regulators’ approach, however, must go beyond the strict, classical regulatory approach. Sustainable finance is challenging the traditional regulatory model to progress toward an advanced regulatory vision and mission of full commitment to a purpose, contributing to the global sustainability goal by shaping business models and conducts according to the highest ethical standards.