Sustainable finance in global capital markets

Key to the achievement of sustainable development is the mobilization of financial capital. The incorporation of sustainability-related principles and objectives in financial decisionmaking falls under the rubric of sustainable finance. Sustainable finance has become a self-sustaining body of principles, standards and practices with which investors, issuers and other actors in capital markets take into account environmental, social and governance (ESG) considerations. Amid the explosive growth of ESG investing in recent years, regulators worldwide are intervening as never before. This chapter provides a high-level overview of sustainable finance at a point in time at which regulatory change and market forces are co-evolving at unprecedented speed, with profound implications for global capital markets. It begins by describing the objectives of sustainable finance and the modalities through which sustainability risks and objectives are addressed in capital markets. It proceeds to examine the regulatory frameworks and strategies adopted – or likely to be adopted – by the United States and the European Union. Drawing on this comparative perspective, the chapter offers observations on the implications of current trends in global capital markets law for the future of sustainable finance.