Regulating Sustainable Finance in the Dark

Abstract

Analyzing the revised EU Sustainable Finance Strategy disclosed in two steps in April and July 2021, we identify as core issues of any sustainability-oriented financial regulation a lack of data on profitability of sustainable investments, a lack of broadly acknowledged theoretical insights (typically laid down in standard models) into the co-relation and causation of sustainability factors with financial data, and a lack of a consistent application of recently adopted rules and standards. The three factors together are now hindering a rational, calculated approach to allocating funds with a view to sustainability which we usually associate with ‘finance’. These deficiencies will be addressed once (1) the EU’s sustainability taxonomy is implemented by most issuers of financial products, (2) several years of taxonomy-based reporting by issuers and originators of financial products is made available, and (3) these data have been used for validating emerging new sustainable finance benchmarks and models for investment and risk management. Until that day (which we expect to be at least 5 years from now), relying on Roberta Romano’s famous adage, regulators seeking to further sustainability by legal means, effectively ‘regulate in the dark.’In order to avoid undesirable and unforeseeable effects of regulation, we argue against any regulation addressing capital requirements, mandating sustainability risk modelling or the inclusion of sustainability factors in investment or remuneration policies. Adopting such rules in the current premature state risks that Europe will not be able to rely on the capital markets to finance the sustainability transformation as planned. Instead, regulators should focus on enhancing expertise on the side of intermediaries and supervisors alike. In particular, regulators should introduce smart regulation tools, such as sandboxes, innovation hubs, and waiver programmes benefiting early adopters of sustainable finance modelling/models, utilizing approaches developed in other fields of experimental financial regulation (in particular Fintech and RegTech).

Integration of Green Innovation Capabilities of Enterprises Based on Ant Colony Optimization Algorithm

“…is provides positive feedback to other ants, and finally, the ant colony will find a path closest to the food source [8,9].…”

“…Under normal circumstances, ants will go to the road with more pheromone with greater probability and then release a certain amount of pheromone on this road to increase the concentration of pheromone on this path. This provides positive feedback to other ants, and finally, the ant colony will find a path closest to the food source [ 8 , 9 ].…”

Unlocking the Green Economy in African Countries: An Integrated Framework of FinTech as an Enabler of the Transition to Sustainability

“…Most papers use the data-driven scientometric analysis [31,[41][42][43][44][45][46][47][48][49][50], basically aimed to investigate the progress and the possible trajectories bordering the FinTech knowledge area. Other research publications use different panel data models, owing to the lack of long time series data related to FinTech indicators and the greening policy [44].…”

“…Most papers use the data-driven scientometric analysis [31,[41][42][43][44][45][46][47][48][49][50], basically aimed to investigate the progress and the possible trajectories bordering the FinTech knowledge area. Other research publications use different panel data models, owing to the lack of long time series data related to FinTech indicators and the greening policy [44]. Panel data were the suitable solution proposed by many scholars; methods go from linear regression modelling [33,51] to complex models such as GMM and 2SLS models [38,[52][53][54][55].…”

Advancing ‘Net Zero Competition’ in Asia-Pacific under a dynamic era: a comparative study on the carbon neutrality policy toolkit in Japan, Singapore and Hong Kong

“…Fiscal policy refers to government spending and taxation, and monetary policy means the management of interest rates and the money supply. Fiscal policy can be used to stimulate economic growth and innovation by increasing government spending or decreasing taxes, which can lead to more consumption and business investment; while financial policy, on the other hand, can lower interest rates to stimulate economic growth by making borrowing cheaper (Marecki et al, 2022;Marino & Tebala, 2022;Olteanu & Fichter, 2022;Zetzsche & Anker-Sørensen, 2022). These could comprise direct subsidies or disguised subsidies for renewable energy-based electricity (FiTs, for example), tax allowances for companies or in forms of purchase tax exemption for consumers' low-carbon product purchases, 2 and granting a belowmarket rate of interest for the purchase or installation of certain goods and services in line with low-carbon transitions (Debbarma & Choi, 2022;Kubín et al, 2022;Larsen, 2022); Direct investment is a government-led approach in which funds are allocated directly to specific projects, companies or organisations (Cardoso et al, 2020;Costello et al, 2009;Erdogan, 2021;Neves et al, 2020).…”