As ESG faces regulatory fragmentation and political pushback, sustainable finance leaders argue that clarity, transparency, and leadership are critical to building credible, adaptable strategies for long-term impact.
In today’s world of polarised headlines and politicised debate, the Vice President of Climate and ESG at a leading international bank argues the question is no longer whether ESG matters - it does.
The real challenge for financial institutions, he told CeFPro’s Sustainable Finance conference v=event earlier this year, is making it work with integrity, purpose and credibility amid fragmented regulation, ambiguous definitions and intensifying scrutiny.
Those working in capital markets face a dual imperative, the executive contends. Regulators, investors and internal stakeholders are demanding more data and disclosures, and these obligations are not going away.
At the same time, compliance alone is insufficient. According to the speaker, efforts must build institutions that are resilient, forward-looking and capable of delivering real-world impact.
European regulation provides both structure and strain. Frameworks such as the Corporate Sustainability Reporting Directive offer a rigorous model for assessing materiality - financially and environmentally - and encourage institutions to evaluate risks and opportunities holistically.
Yet, the expert noted, the operational burden is immense, particularly where rules overlap across jurisdictions and interpretations of sustainability diverge. What one authority deems sustainable may not align with another, creating confusion rather than clarity.
Still, within these challenges lie opportunities. The he emphasized that gathering ESG data, aligning reporting and engaging with clients is more than a compliance exercise.
It creates a foundation for strategic dialogue, deepens client relationships, sharpens insight into supply chains and enables financing solutions that address real needs.
Regulation may constrain, he says, but it also catalyses stronger engagement and more innovative finance.
The executive sees the green finance market as the clearest path forward. Use-of-proceeds bonds are well defined, widely understood and supported by strong investor demand; their structures are familiar and carry relatively low reputational risk.
But he cautioned that the future cannot rest solely on green bonds. The harder, more important work lies in transition finance - moving beyond simple ‘green’ or ‘brown’ labels and operating in the grey space where real change occurs.
That grey space is still underdeveloped. Transition finance lacks standardised definitions, making benchmarking difficult and the reputational risk is significant, particularly in the United States where ESG has become a political flashpoint.
