Sustainability and the Rebuilding of EU Financial Regulation

From the EU Taxonomy to the upcoming CSRD, the European Union has undertaken to rebuild financial regulation to make financial flows consistent with the transition to a sustainable economy as mandated by the Paris Agreement. This unprecedented exercise in overhauling financial law through the lens of sustainability has been progressing rapidly, jostling the routine of market actors and regulators alike. Yet, the way forward presents key challenges for the achievement of these reforms. The first one is the identification of the objective that the reformed EU financial regulation must ultimately pursue: sustainability at large or responding to the climate emergency. The second challenge is one of coherence of the reform, as the EU has until now proceeded with a piecemeal approach. Finally, implementation and enforcement are the next critical step that awaits the EU and for which the European System of Financial Supervision is ill-prepared.