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This paper aims at exploring the extent to which transparency is able to boost and safeguard asustainable financial system. Requiring disclosure from market participants is a recurring regulatorytechnique of financial law. Whether it is in relation to listing securities on the stock exchange, acquiringa significant proportion of shares or launching a takeover bid for a company’s share, transparency ofmarket participants’ activities is a core element of a well-functioning financial system that lies at theheart of most policy responses in financial market law. The same holds true for the regulatory effortsin relation to sustainable finance, aiming at redirecting private capital flows towards businesses andprojects that create sustainable value within the planetary boundaries. In 2015, Mark Carney, theformer Governor of the Bank of England, argued in its famous speech “Breaking the tragedy of thehorizon”, that most financial actors ignored climate risks, notably because of the lack of transparencyas to who was holding risky assets. In the same line of thinking, the EU Commission acknowledged inits Action Plan on Sustainable Growth that “[i]ncreased transparency, underpinned by innovativetechnologies, empowers citizens to compare the sustainability performance of companies and allowsretail investors to make informed investment decisions”. The High-Level Expert Group (HLEG), guidingthe European Commission in its quest to make the European economy sustainable, has identified thepervasive lack of transparency across the investment chain as the main challenge to the achievementof a sustainable financial system. Subsequently, the Financial Stability Board (FSB), an internationalbody established by the G20 responsible for monitoring the financial system, established the industrybasedTask Force on Climate-related Financial Disclosure (TCFD), which shaped a new way of thinkingand published a set of voluntary recommendations on disclosure of climate-related risks in 2017.Transparency is directly liked to disclosure requirements and to the way this affects long-terminvestment decisions. The basic idea is that corporations, investors, asset managers and financialadvisers are requested to disclose how sustainability risks are considered in their business activities,investment decision-making or advisory processes, which contributes to reducing the informationasymmetries between financial actors and their clients. It comes therefore to no surprise that thefinancial sectors’ response to pressures around climate change and other sustainability risk factorsemphasize disclosure. With this context in mind, this paper aims at analysing the extent to whichmandatory disclosure requirements in the financial sector are able to boost and safeguard sustainablefinancial system. The overarching question of this analysis is: What is the purpose of sustainabilityrelatedrequirements in the financial sector and are the challenges in implementing disclosurerequirements? Special attention shall be paid to the situation in the European Union, where the firstbinding sustainability-related disclosure requirements for the financial services sector came into forcein spring 2021, both at the company and the product levels. The aim of this paper is twofold: On theone hand, it explores the main features of the complex Sustainable Finance Disclosure Regulation(SFDR). On the other hand, it assesses the challenges of implementing mandatory disclosurerequirements, by systematically analysing the limits and drawbacks of the SFDR.
Xenia Karametaxas holds a PhD from the Law School of the University of Geneva. Her PhD thesis, which she finished in 2018, focused on the engagement and responsibilities of institutional investors. She currently works as a postdoctoral researcher and as a lecturer at the Chair for Law and Finance at the University of Zurich, where she seeks to explore how global financial regulation should be designed to promote sustainability. Her research interests include fiduciary duties institutional investors, investment law, comparative and international financial regulation, financial inclusion and digitalisation. She currently teaches Case Studies in Swiss Corporate Law at the University of Zurich. She is the co-founder of the Sustainable Finance Research Network, which conducts academic and policy-based research on issues that relate to financial market regulation and environmental and social sustainability.
- Speaker
- Dr Xenia Karametaxas
- Hosted by
- Centre for Commercial Law
- Venue
- Online Event