It was the Spring of 2016. I was chatting with a colleague in the Finance Department of the Fisher College of Business at Ohio State. He was looking for new research ideas in the area of global financial markets. I mentioned to him that I was interested in the newly expanding "Green Bond" market in Europe. The government of France had announced they were planning on issuing their first Green Bonds the following year, and the government of Poland was planning to do it even sooner. I thought that this "new" segment of financial markets might prove to be very interesting as the need to address climate change was growing in importance. My colleague was not impressed. While waving his hand in a fashion similar to how some shews away a housefly he stated, "that sounds like a European legal issue, not a finance one." I shrugged my shoulders and went back to sipping my mocha.
I was reminded of that conversation, all those years ago, when I came across Tadas Zukas' new book "European Sustainable Finance Regulation in a Nutshell." Dr. Zukas' book does an excellent job of explaining the European legal structure, of what we now call, sustainable finance. He does so while taking the reader along the historical evolution of these markets and regulations. Zukas explains in the clearest way possible why my colleague was wrong. Financial regulation is not a "legal issue" it is fundamental to understanding the context in which sustainable finance functions.
Different Parts of the book
The first major part of the book, called Part 2 "Global Context" comes after the very brief Part 1 "Users Guide". This part 2 of the book takes the reader by the hand and leads them through the history and evolution of sustainable finance. The reader is led through the myriad of legislation, agreements, initiatives, etc. while focusing on the Paris Agreement and UN Sustainable Development Goals. Even the seasoned veterans of sustainable finance will find this part of the book informative and enlightening.
Next comes Part 3 which has the lengthy formal title of "Fundamentals of European Sustainable Finance Regulation." Perhaps a better title for it would be "Getting to Know the European Action Plan" since that is what this is all about. In this section Dr. Zukas does an excellent job of helping the reader to understand the differences between transitional finance, sustainable finance, and traditional finance. The European Action Plan for Sustainable Finance, or simply the Action Plan, is used to demonstrate the important differences between these different versions of finance. This rather lengthy part of the book, at 88 pages, prepares the reader for the next, and main part of the book.
Part 4 of the book "Navigating Key European Sustainable Finance Regulations" at 122 pages is packed with information. Zukas throws the reader a lifeline at the beginning of the section when he clearly lays out the abbreviations, titles and brief descriptions of the various regulations and directives. Throughout this section Zukas helps the reader along with easy-to-follow Venn Diagrams some of which guide the reader to see where we have been and where we are headed. He also uses green boxes to demonstrate how the actual wording of the directives aligns with his explanations. The reader can't help but get the feeling that Dr. Zukas is on their side, there to guide them through this intellectual journey, and not to merely pontificate his brilliant knowledge (as some academics tend to do in their writing). Let me give you just one example: in §11, subsection 10 before delving into a rather detailed (for this economist) discussion of product level disclosures, Zukas explains that he will next explain four important articles of the SFDR (Sustainable Finance Disclosure Regulation, aka Disclosure Regulation among friends). He ends the overview with "Let us look at them all and try to make some sense of the system." The reader can almost feel Zukas' arm wrap around your shoulder as he gives you a squeeze of support while saying "you got this."
Part 5 of the book addresses the thorny issue of Greenwashing. This is when a product gains an unwarranted advantage when it is marketed as being environmentally friendly, when if fact it is not. As it turns out there are eight different legal definitions of greenwashing! If that isn't enough there are also a variety of ways to regulate greenwashing and attempts to stop it before it begins. Zukas does a nice job in breaking down this very complicated legal concept.
The last two parts of the book Part 6 on "Hot Topics" and Part 7 on "Outlook: The Next Ten Years." These are two of the shorter parts of the book, but they are not to be overlooked. These are very current issues, and only time will tell how these topics evolve.
So Zukas does something very interesting with the framework of the book: he starts by looking back, giving a detailed history of sustainable finance, spends most of the book examining the status, controversies, and actual market outcomes of sustainable finance regulation. He then ends the book by looking forward. Through it all he manages to make a very complex legal topic useful for non-lawyers.
My suggestions
If I had to make suggestions for improvement for the next edition of the book, I would suggest breaking up Part 3 (on the Action Plan) and Part 4 (on Regulation). Perhaps lawyers are more accustomed to reading lengthy documents, but for those non-lawyers of us out there, more digestible "bites" would help in retaining and referencing the material. While the pages are physically small and thus the word count per page is not excessive, I would suggest each part be no more than 50 pages long.
I would also suggest that each Part start off with an executive summary of a page or two. This will help the reader to gain an understanding of what is coming next and help serve as a refresher after reading the entire book. Also, to assist in using the book in an academic setting, which I highly recommend, each section should end with a list of questions, perhaps five to ten questions, to help reinforce the reader's mastery of the material.
These suggestions are more style in nature than content. The content is outstanding as it stands. My only hope is that a new edition of the book comes out every 2 to 3 years to keep the readers up to date on the changes that occur in sustainable finance and the European regulation of these important markets. Zukas has created an extremely useful, informative, and readable text that will sure to an important tool for lawyers and non-lawyers alike.
Final thoughts
Zukas proved, I believe, that my colleague was wrong, sustainable finance is not a purely legal issue. What Zukas does so well is to show that gaining insight into the legal framework of sustainable finance gives "finance people" a much better understanding of these markets they are either studying or working in, or attempting to regulate. Each of these groups will benefit from Zukas' work.