ESG Integration and SRI Strategies in the EU: Challenges and Opportunities for Sustainable Development (Palgrave Studies in Impact Finance)

This book analyses sustainable finance policies implemented by the European Commission since January 2020. Gathering contributors from a range of European and international universities, it particularly aims to explore how EU strategy on green finance encourages and stimulates socially responsible investments that provide solutions to the challenges of the energy transition. The book provides a comprehensive coverage of economic, financial and legal issues concerning green finance and ESG factor integration in the EU. The first part of the book discusses theoretical and empirical perspectives on socially responsible investments (SRIs) and ESG integration, while the second section focuses specifically on the role of corporate governance in both institutional and private investment spheres. The third part of the book explores valuation and risk, including a discussion of current trends in SRI funding in the new European ESG Regulatory Framework. The final section of the book discusses legal and regulatory issues including an exploration of blue finance and its incorporation into EU financial strategy. This edited collection will be of interest to researchers and policymakers working in green finance, sustainability, energy economics and financial law. Preface Praise for ESG Integration and SRI Strategies in the EU Contents List of Contributors List of Figures List of Tables 1 Introduction Part I Theoretical and Empirical Issues on SRI and ESG Integration 2 Theory of Socially Responsible Investment: A Review 2.1 Introduction 2.2 Socially Responsible Investors with Warm-Glow Preferences 2.2.1 Why Does the Neoclassical Model Fall Short? 2.2.2 Warm-Glow Model of Socially Responsible Investors 2.2.3 Policy Implications of SRI 2.3 Beyond Warm-Glow Preferences 2.3.1 Moral Mechanisms Driving Warm-Glow Payoffs 2.3.2 Moral Considerations 2.3.3 Policy Implications of Moral Motivation 2.4 Outlooks Appendix References 3 The Performance of Socially Responsible Investing: A Review 3.1 Introduction 3.2 The Underperformance Hypothesis of SRI 3.3 The Outperformance Hypothesis of SRI 3.4 The Neutral Performance Hypothesis of SRI 3.5 Conclusions References 4 SRI: An Insight on the Evolution of Its Definition and a Focus on the European ESG Regulation 4.1 Introduction 4.2 The Evolution of SRI Definitions: A Review 4.3 SRI Strategies for a Possible New “Classification Scheme” of Sustainable Investments 4.4 The Concept of “Sustainable Investment” in the New European ESG Regulation Framework 4.5 Conclusions References Part II Corporate Governance, SRI and ESG Integration 5 Attractiveness of Sustainable Business and Investments: An Ethical, Legal or a Financial Issue? 5.1 Introduction 5.2 Legal Issues 5.2.1 Voluntary Legal Options 5.2.2 Mandatory Rules 5.3 Financial Issues 5.3.1 Assessment of Sustainable Investments 5.3.2 Risk Measures 5.3.3 Obstacles 5.4 Conclusions References 6 ESG Initiatives and Directors’ Fiduciary Duties 6.1 Introduction 6.2 The Theoretical Frame 6.3 The State of Art on CSR 6.4 The EU Proposal for Corporate Sustainability Due Diligence 6.5 Conclusions References 7 Insurance Industry and Sustainability Preferences: Contracts and Products 7.1 Insurance Companies and ESG: Introductory Remarks 7.2 Tools for Enhancing Sustainability in the Insurance Sector: Exclusion Lists; Technical Provisions and Investment Strategies; the Manufacturing of ESG-Oriented Policies 7.3 Non-life Insurance and ESG-Oriented Policies 7.4 Sustainability Preferences and Customers’ Protection Legal Framework: Sales with Advice, Sales Without Advice, Execution-Only 7.5 Sustainability Preferences in the Information Collection Process: The Role of Sustainability Assessments 7.6 POG and Insurance Sector: Premise. Large Risks and Sustainability 7.7 POG and Insurance Sector: From a Weaker Contractual Party Protection Model to an Instrument for the Implementation of ESG Goals References Part III ESG Integration: Valuation, Products and Risks 8 The Role of ESG on Credit Rating in the Banking Sector: A Mediation Analysis to Disentangle the Direct and Indirect Effects 8.1 Introduction 8.2 The ESG Pillar 8.3 The Thomson Reuters Variables 8.4 Methodology 8.4.1 Modelling the Response via the Cumulative Logit Model 8.4.2 Modelling the Mediator via a Linear Regression 8.4.3 The Decomposition of the Effects 8.4.4 Computational Issues 8.5 Empirical Application 8.5.1 Data Sample 8.5.2 Results 8.6 Discussion 8.7 Conclusions References 9 The European Blue Economy Framework and Blue Bonds as New Instruments of Blue Finance 9.1 Introduction 9.2 The Blue Economy in Its Growing Global Relevance 9.3 The New European Blue Economy Framework 9.3.1 The Main European Initiatives Developing Sustainable Economy 9.3.2 The EU Blue Economy Reports2021 and 2022: Aims and Some Contents 9.3.3 The Financing of EU Blue Economy: Some Issues 9.4 The Blue Bond as a New Instrument of Blue Finance 9.5 The Rising Blue Bond Market 9.6 Conclusions References 10 The Effects of the European Sustainable Finance Disclosure Regulation on SRI Funds: A Comparison at a Global Level 10.1 Introduction 10.2 The Sustainable Finance Disclosure Regulation (2019/2088/EU) in the New European ESG Regulatory Framework 10.3 EU SFDR’S Effects on SRI Fund Trends in Europe 10.4 A Comparison with the Current Trends Of SRI Funds at the Global Level 10.5 Conclusions References Part IV Legal and Regulatory Issues on SRI and ESG Integration 11 ESG Targets for the Financial Sector and the Choice of Legal Instruments 11.1 Introduction 11.1.1 Research Question 11.2 The System and History of International Financial Regulation 11.2.1 Introduction 11.2.2 The Period of 1929–1933 11.2.3 The Period of 1934–1973 11.2.4 1970s to Current Times 11.3 The European Regulation of ESG 11.3.1 Introduction 11.3.2 The Taxonomy Regulation and Sustainable Finance Disclosure Regulation 11.3.3 Balancing ESG Compliance with Other Legal Obligations 11.4 What Role Remains for Soft Law and Self-Regulation? 11.4.1 Introduction 11.4.2 Hard Law vis-à-vis Soft Law 11.4.3 ESG Objectives Through Soft Law Arrangements 11.5 Towards Green Corporate Governance 11.5.1 Introduction 11.5.2 Four theories of Corporate Governance 11.5.3 Integrating ESG into the Stakeholder Theory 11.6 Integration: Towards Multilevel ESG Regulation 11.6.1 Introduction 11.6.2 The Integration of ESG in Multilevel Governance 11.6.3 The Advantages and Vulnerabilities of Multilevel ESG Regulation 11.7 Conclusion References 12 Environmental, Social and Governance Criteria in the Netherlands: Interaction Between Government and the Courts 12.1 Introduction 12.2 Hard Law: The Social of ESG 12.3 Urgenda Court Case 12.4 Milieudefensie vs. Shell 12.5 Annual Reports 12.6 Influence on ESG Policies of Companies in Annual Meetings 12.7 Industry Opposed to a ‘Duty of Care’ in Legislation 12.8 Milleudefensie in April 2022 12.9 Loans, Banks and Farmers 12.10 Final Remarks References 13 The Language of the European Union About SRI: A Diachronic Linguistic Analysis (2002–2022) 13.1 Introduction 13.2 A General Overview of the Corpus 13.3 Wordlist 13.4 Keywords 13.5 Thesaurus 13.6 Word Sketch 13.7 Trends 13.8 Conclusions References Index