Promoting sustainable finance in Europe

• Department of Law

PhD thesis defence by Pranav Putcha

This thesis is a comprehensive, interdisciplinary vivisection – if not a post-mortem – of EU Regulation 2019/2088 (the SFDR), which establishes sustainability disclosure obligations in the financial sector. The SFDR is one of the central components of the continuously evolving EU framework of sustainability rules. However, it receives comparatively limited scholarly attention vis-à-vis rules on corporate sustainability and due diligence. This work is motivated by a need for deeper research into the financial sector and the imperative to apply mixed methods in understanding the design, position and functioning of this regulation. Additionally, upon its implementation, the SFDR entered a crowded market of voluntary sustainability disclosure initiatives, whose role and importance are relatively under-studied.

This thesis adopts an ambitious theoretical framework based on concepts from regulatory theory and political economy, which are applied to a two-pronged analysis of the SFDR. It first focuses on how the SFDR is (or is not) enforced, and how this compares to other possible approaches. Despite the EU’s sophisticated legal framework, enforcement appears to be soft and fraught with challenges. Next, the thesis analyses the role played by voluntary reporting frameworks. This comprises empirical analyses, both quantitative (through a linguistic analysis of responses to public consultations) and qualitative (through analysis of documents and semi-structured interviews). The public consultations show firms engaging constructively with the legislative process and, in some cases, adducing voluntary frameworks in their responses. Interviewees, meanwhile, identify gaps between the ambition of the SFDR and financial market practice. Even though some interviewees see mandatory regulation as superseding voluntary approaches, the SFDR’s complexity and scope challenge even the most ardent proponents of sustainable finance. The thesis concludes by considering what the wider market context in financial services demands of the SFDR. It also discusses the potential effects of recent and ongoing political developments.

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