Policy Hotspots for Sustainability: Changes in the EU Regulation of Sustainable Business and Finance

Abstract

To ensure sustainable development, there is not only a need to re-think how the economic playing field is structured, but also the regulatory system that governs it. Business and finance law reforms will represent a crucial element of such a transition. However, little progress has been made to date. The European Union (EU) business and financial market law have been analysed systematically in relation to sustainability to a limited extent. This study aims to contribute to this gap through a reflexive governance analysis of corporate financialisation in the EU business and financial market law. I identify ‘policy hotspots’ with the potential to advance the EU’s commitment to sustainable development. I use a mixed-methods approach consisting of social network analysis and semi-structured interviews. This approach allows me to perform a structural analysis of the formal institutional processes, complemented by a qualitative analysis that unpacks the potential of the identified policy hotspots. I argue that the EU’s action has a path dependency created by two major policy approaches that have informed the EU business and financial market law. These approaches build on the shareholder maximisation norm and an action agenda on non-binding measures. This has contributed to internalising the corporate financialisation processes in EU policy-making and seems to limit the EU’s ability to create sustainable legislation. While these approaches may represent barriers, the findings show that the identified policy hotspots represent two tentative pathways of action for achieving sustainable business and finance in the EU: the Sustainable Finance initiative and the Single Market.