History of sustainable finance regulation: the European Odyssey

Clara Fuster-Navarro, Lorena Pérez-Alfonso and María Pallarés-Renau

Journal of Financial Regulation and Compliance, 2025, vol. 33, issue 5, 673-694

Abstract: PurposeThis paper provides a comprehensive overview of the concept of sustainable finance in the European framework to contribute to the clarification of the term, to promote the understanding of the evolution of the phenomenon by presenting the main milestones in chronological sense and to present a matrix of regulatory interrelation to locate patterns of convergence, regulatory gaps and show feedback between actors. Although the origins of the concept date back to the 1960s, the term has become topical with the emergence of environmental, social and governance (ESG) responsibilities in the business world.Design/methodology/approachThis study is framed in the field of legal historiography to understand the contemporary phenomenon of sustainability. To this end, in line with the approach of authors such as Paradisi (1973) or de Diego (1974), the evolution of European regulations and their documentation in the field of sustainable finance regulation since the 1960s is studied, to know the influence of standards in corporate contexts and vice versa, and to contribute to the promotion of reflective criticism of legal thought.FindingsThe complexity of the concept of financial sustainability is highlighted from a legal point of view with the growing and complex regulations issued by different European bodies and commissions. This paper aims to clarify the concept, for its proper implementation in organizations, through its evolution over time and presents a matrix of regulatory interrelation that reveals the growing trend toward a regulation with a triple impact approach (ESG criteria), of a mandatory nature and with greater scope, which seeks transparency in the rendering of nonfinancial information.Research limitations/implicationsIt is advisable to delve into the evolution of the sustainable finance until its consolidation, as well as to analyze the regulation of sustainable finance in the EU, evaluating its application in each country and the influence of international guidelines. Also, to develop sustainability indicators that integrate governance criteria, as sustainable companies should not only be based on legal requirements. It would also be useful to examine how ESG regulation interacts with investor protection and the role of the European Central Bank (ECB) in reconciling market neutrality with environmental objectives, valuing transparency and accountability as key to corporate alignment and regulatory effectiveness.Practical implicationsA number of professionals interested and involved in this field may find this document useful, as it provides a historical and legal framework that helps academics identify gaps in the literature and encourages future research on the role of companies and the inclusion of ESG criteria in financial decisions. It promotes strategic decision-making by professionals by listing and clarifying legal obligations, facilitating the implementation of sustainability criteria and anticipating trends in sustainability policy. And it seeks an integrated vision of regulatory milestones by facilitating the assessment of the coherence of European policies with global goals by policymakers and regulators, and by facilitating the identification of regulatory gaps to improve the design of new initiatives.Originality/valueThis paper provides a comprehensive historical overview of the genesis and regulatory development of sustainable finance, contributing to its conceptual clarification. Unlike previous studies focused on specific regulations or isolated cases, it incorporates the matrix of regulatory interrelation to analyze the purpose, approach, relationships and shortcomings of the regulations. Its relevance lies in addressing the ESG perspective from a historical and legal approach, clarifying the complex European regulations and serving as a framework for action for companies. The lack of consensus on the definition of sustainable finance, the proliferation of regulations, the lack of familiarity with its application and the low financial awareness underlines the importance of the paper for academics and entrepreneurs, justifying its originality and relevance in the specialized literature.

Keywords: Taxonomy; Sustainable finance; ESG; European Union (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrcpp:jfrc-11-2024-0226

DOI: 10.1108/JFRC-11-2024-0226

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