‘Save the banks or save the planet?’: governing through strategic ambiguity in EU sustainability-related banking regulation

The literature remains divided on whether sustainability-related financial ­governance has shifted from a narrow risk-based approach to a stronger focus on transition pathways, and whether the currently dominant approach has the potential to redirect credit away from high-carbon investments toward greener sectors. Building on a strategic-relational approach and the concept of ­strategic ambiguity, as well as insights from 30 expert interviews, documentary analysis, and three public consultations, we argue that the introduction of the current sustainability-related financial policy approach in the EU was conditioned on an ambiguously framed risk narrative. By reconstructing the policy process, we suggest that while strategic ambiguity initially helped to preserve an element of credit steering, it ultimately hampered its full institutionalization. Thus, we conclude that the current policy approach neither constitutes a simple ­continuation of existing prudential approaches nor marks a substantial ­divergence from them, i.e., allocative policies. While we contend that the ­dominant approach has shifted toward a stronger focus on transition ­pathways, we suggest that it represents an unbalanced mediation of stakeholders’ ­interests, which also limits its allocative potential.