Does the regulatory framework keep up? In terms of sheer volume, it does. Not having the patience to collate and count myself, I asked ChatGPT about the scope. Here’s an interesting run-through:
- The Markets in Financial Instruments Directive II (MiFID II). The full directive, inclu-ding parts not directly pertaining to ESG, spans 1,500–2,000 pages. MiFID II requi-res financial advisors to assess and align investment strategies with their clients’ sustainability preferences.
- The EU Taxonomy Regulation. 50 pages + over 400 pages of delegated acts.
- The Sustainable Finance Disclosure Regulation (SFDR). Approximately 120–150 pages, including the regulatory technical standards (RTS).
- The Corporate Sustainability Reporting Directive (CSRD). Roughly 100 pages in English (applies to approximately 50,000 entities in the European Economic Area (EEA)).
- The European Sustainability Reporting Standards (ESRS). Consists of 13 separate reports totalling approximately 1,100 pages, including technical appendices and explanatory notes.
- The Insurance Distribution Directive (IDD). The directive itself is roughly 50–100 pages, with additional guidelines and technical standards expanding its application.
“This highlights a growing Atlantic divide. ”
This highlights a growing Atlantic divide. The EU functions as the only international legislator, with cross-border legislation relevant for all funds wanting to attract Eu-ropean investors, shaping ESG strategies and disclosure standards worldwide. But while the EU leads in regulatory volume, the US seems to be adopting a very different stance. Indeed, the very attempt to make sustainable investing a standard investor option has been met with resistance, being described as an outright backlash.
