The sticky, muddled geopolitics of sustainable finance regulation

Abstract The geopolitical implications of climate change are vast, including the harnessing of capital to finance investment in response to it. Sustainable finance is an emerging geopolitical terrain that offers countries the ability to project and protect their policy preferences through their control over financial flows, institutions, and assets. This article explores the ways in which the regulation of sustainable finance—under the broad category of ESG (environmental, social, governance) investing and otherwise—enables and constrains its use as a means to re-orient financial flows to achieve geopolitical objectives. While the use of sustainable finance as a tool of geopolitical competition is still nascent, I argue that geopolitics diminishes the capacity of the financial system to effectively and equitably address climate change and other sustainability threats and hinders international lawmaking and global regulatory coordination in sustainable finance. This article analyses the use of sustainable finance regulation as a geopolitical strategy and explores how the international financial architecture may be able to overcome geopolitical pressures to facilitate global cooperation.