Until we meet again: ESG, law, and geopolitics

Abstract This article explores how geopolitics affects international financial regulations’ (IFRs) efforts to address environmental and social issues by focusing on the financial regulations of environmental, social, and governance (ESG) investment. While geopolitical tensions complicate the IFRs’ promotion of ESG objectives, this article argues that they are not the primary impediment but expose the shortcomings of the underlying market design of ESG investment. Based on the premise that ‘doing good leads to doing well’, ESG investment centres on market operations and aims to promote the public good by incentivizing capital accumulation. Such an approach reflects a particular market design, one that subordinates law to market mechanisms. With this design, ESG investment embraces an instrumental conception of the law, utilizing it to facilitate and safeguard ESG investment operations. Yet it undermines necessary public law interventions for overcoming the externalities of misaligned private incentives in market operations. ESG promotion concerns the broader market–state dynamic and governance, as well as the reimagination of inter-state cooperation tools to either bolster or displace IFRs. Current geopolitical tensions present a unique opportunity to fundamentally reimagine law and governance practices for the promotion of ESG.