Diffusing Environmental Regulation through the Financial Services Sector: Reforms in the EU and other Jurisdictions

Abstract

The financial services sector has the potential to be an important facet of future systems of environmental governance. But, so far, only ad hoc policy initiatives have arisen in the EU and other countries addressing the environmental roles of banks or insurers. Because the financial services sector is where wholesale decisions regarding future development, and thus pressures on the environment, arise, reform of investment, banking and insurance services to promote long term investment and better consideration of environmental impacts may be an effective way to promote sustainable development. Reforms such as corporate environmental reporting requirements, mandatory environmental liability insurance, and lender liability for borrowers' environmental harms, are some of the ways in which an institutional framework for mobilizing financial organizations as instruments of environmental regulation could be constructed.