The Blind Spot

In the first article in this three part-series we explored the nature of directors' duties in driving the ESG agenda. For financial services in particular, merely focusing on directors' duties will not drive any meaningful change.

The regulators are aware of this, and instead often propose to approach the problem by imposing "brown penalties". Rather than impose change through positive duties, they seek to penalise financial institutions with burdensome regulatory capital requirements if their balance sheet is too heavily "brown". This presents a danger to financial stability, risking – as it does – the wholesale pestment of less-than-perfectly-green assets.

The regulatory response