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"Archiwum Krminologii" 2025, t. XLVII, nr 1
(INP PAN, 2025) Ostaszewski, Paweł; Włodarczyk-Madejska, Justyna; Klimczak, Joanna; Klaus, Witold; Kuliński, Łukasz; Kopeć, Maria; Woźniakowska, Dagmara; Wzorek, Dominik; Roubalová, Michaela; Přesličková, Hana; Holas, Jakub; Więcek-Durańska, Anna; Nowakowski, Krzysztof; Gubała, Aleksandra; Wieczorek, Łukasz; Orłowski, Jakub; Klaus, Witold
Constitutive role of law in sustainable finance
(2025) Smoleńska, Agnieszka
Constitutive role of law in sustainable finance
Dr Agnieszka Paulina Smoleńska
Abstract
The sustainability transition requires a fundamental change in the way economies function in order to align socioeconomic systems with planetary boundaries. From a legal perspective, such a shift should entail a transformation of the prevailing legal coding of economic relations to enable consistent integration of social and environmental considerations. Within the emerging sustainable finance trend, shoots of change are visible: new financial instruments, such as green or sustainability-linked bonds and loans, appear to be reorienting the market relationships around sustainability impact issues. A sociolegal and legal institutionalist analysis of this trend reveals how such instruments shape and are shaped by different facilitative, regulatory and constitutive facets of law. Using EU green bond issuances as a case study, the article highlights how law expands and limits the transformative potential of such novel financial instruments. The analysis is revealing of the co-constitutive dynamics of law and sustainable finance. In this context, the article makes three contributions. Firstly, it offers a comparative case study of law’s co-constitutive dynamics in the case of financial innovation designed for environmental and social impact. Secondly, it identifies the co-constitutive dynamics of law and (sustainable) finance relating to differentiation and expansion. Thirdly, it finds variance in the law’s co-constitutive role at the micro-level of financial interactions, and in meso-structures that emerge in the context of sustainable finance specifically. To the extent that sustainable debt instruments are increasingly linked to a company’s overall performance and corporate governance, the article’s findings have implications for the integration of social concerns in financial instruments.
1. Introduction. Legal coding for sustainability: A dangerous mirage?
In 2013 the Swedish property developer Vasakronan was the first corporation to issue a bond with a pre-defined sustainable purpose, namely to finance the improvement of the energy performance of buildings in its portfolio. In 2019, the Italian energy company ENEL raised capital through general-purpose issuance linked to a commitment to decarbonise its activities over the lifecycle of the bond, agreeing to a step-up on the repayment costs in the alternative. These two types of financial instruments, offered as loans or bonds, are known respectively as ‘use of proceeds’ instruments to finance pre-defined social or environmental projects and ‘sustainability-linked’ instruments involving commitments to improve performance over specific time horizons. Both have seen increased interest from corporations, banks and investors, with sustainable corporate bonds comprising just under 10% of global bond issuance in 2023, and sustainable commercial loans covering 6% of overall lending at peak volume in 2022.
The sustainable finance trend instigated a rich debate as to the real economic impacts that sustainable finance may have. Does the moniker ESG (environmental, social and governance) even make sense? If all firms are faced with the looming threat of transition and physical risks, should not all investors take into account these factors across the board, rather than developing a suite of ‘special’ green financial products? And – regarding industrial relations issues in particular – aren’t such instruments just fancy packaging for simply following the relevant environmental and labour laws? While such questions are undoubtedly well founded, the focus on the immediate outcomes of deploying such instruments arguably overlooks the transformative potential that they may have with respect to the legal coding of capitalism. As I argue in this article, analysing sustainable finance instruments such as green bonds from a legal institutionalist and sociolegal perspective reveals avenues for reimagining the extractive coding of key legal modules, including company and contract law, in a way that differentiates such financial instruments from ‘traditional’ finance. Expanding the analysis beyond the formal terms of debt instruments to consider how the legal environment more broadly shapes the coming together of actors (negotiation) and enforcement (also via monitoring, marketing and macro-financial regime) further captures the potential for capitalism’s meso-structure transformations.
Sustainable finance is already recognised as a legal and regulatory phenomenon. In many jurisdictions, it is associated mostly with public regulation (taxonomies and disclosure rules) and strategic litigation that expands the scope of corporate governance rules to mandatory social and environmental considerations. Legal scholars have also already explored how the legal structuring of green bonds differs from a governance perspective by enabling investors to regulate company behaviour and how it is shaped (and constrained) by the prevailing corporate governance regimes. Such explorations reveal the role of law to have been ambiguous at best: existing law limits the process of integrating sustainability concerns in financial relationships, and in fact undermines any sustainability commitments through widespread disclaimers and waivers that accompany sustainable finance instruments.
However, how sustainable finance, such as green bonds, affects the legal structuring of individual financing relationships – as I argue in this article – is revealing of the transformative potential of the co-constitutive role of law in socioeconomic systems. If we broaden the legal analysis beyond the formal terms of the debt instrument, and consider the legal environment that shapes its content and the mutual expectations of actors before, during and after the negotiations, that is, in the various forms of enforcement, a fuller picture emerges, one that suggests opportunities for the law to transform finance so as to serve shared prosperity, notwithstanding the constraints of the market-based socioeconomic models.
To this end, the article analyses the ‘green terms’ in green bond prospectuses issued by 35 corporations in four EU Member States between 2019 and 2024. As is further explained below, such green terms appear not only in the context of specific ‘green’ or ‘sustainability’ commitments of the issuing firm, but also in the context of waivers or risk disclosures – indeed suggesting that legal coding of capital may shield such transactions against integrating sustainability goals. However, this finding is not universal – differences among jurisdictions offer avenues for enforceability. Furthermore, supplementing the legal analysis with insights from interviews with lawyers and bankers involved in the structuring of the transactions can identify changes in the broader institutional environment that influence the mutual expectations and relationships between the actors, notwithstanding the apparent constraints of the law. Overall, I show how sustainable debt’s legal environment may entail changes in the terms of interaction between market actors that are regulatory (in the sense of shaping behaviour), facilitative (in the sense of how the actors are brought together) and foundational (in the sense of embedding new dimensions of environmental and social sustainability concerns into the firm–finance relationships). To the extent that sustainable debt instruments are increasingly linked to a company’s overall performance and corporate governance, such financing trends have a bearing on broader industrial relations, even where they appear to be concerned only with environmental matters. For example, assessments of environmental impact that the company needs to put in place often involve new forms of engagement with company’s stakeholders, including own workers and local communities.
This article proceeds as follows. Section 2 outlines the emergence and main features of sustainable debt instruments, focussing on the European Union (EU), where the trend has been particularly pronounced. Section 3 develops the methodological approach to investigating the co-constitutive dynamics between law and sustainable finance, one that looks beyond the formal terms of financial instruments and expands the analytical scope to capture the legal environments of the preceding negotiations and the modes of market and public enforcement once the debt is issued. Section 4 analyses the empirical findings in relation to how the different aspects of the legal environment interact with green debt across its lifecycle. Before concluding, Section 5 discusses the identified dynamics of differentiation and expansion in micro-level interactions and the meso-level structures as key insights into the potential co-constitution of law and (sustainable) finance. I show how law plays a co-constitutive role in sustainable finance by both enabling and constraining its transformative potential, as legal frameworks, negotiation practices, and macro-financial regimes shape how sustainability objectives are integrated into financial instruments like green bonds.
2. The expanding universe of sustainable debt
Sustainable-themed debt instruments are financial products whose terms have been linked to sustainability factors, such as environmental or social performance. The universe of sustainable finance instruments spans bonds, which may involve raising funds on capital markets, and loans, typically extended by individual banks or through syndication involving several credit institutions. In addition to financing related to climate change (e.g. financing renewable energy or investing in energy efficiency), borrowers may be seeking funds for specific environmental purposes (e.g. ‘blue bonds’ dedicated to projects linked to ocean preservation). Social – and especially labour-related – issuances have been less popular among corporate issuers, with government actors remaining the key borrowers in this segment, in contrast to green and sustainability-linked financial products. However, corporate sustainable finance instruments often include social objectives, either directly as a key performance indicator (KPI) or dedicated use of proceeds, or indirectly, for example, where the satisfaction of green-related objectives involves meeting minimum requirements regarding labour standards or taking into account the Sustainable Development Goals (SDGs). All sustainable finance instruments, however, are inherently linked to the overall strategy of the firm, the time horizon of operations and the relationship with stakeholders, and therefore have a bearing on industrial relations even when the substantive scope of the financial instrument may be limited to environmental concerns.
From a market perspective, sustainable-labelled debt instruments are differentiated from traditional financing instruments by the fact that they are linked to specific sustainability objectives. As summarised in Table 1, two ways of linking financing with sustainability goals are distinguished: ‘use of proceeds’ terms, where firms commit to using the funds raised to implement specific projects selected in accordance with pre-defined objectives (e.g. related to climate change mitigation, such as renewable energy production, or social issues, such as housing availability), and ‘sustainability-linked’ terms, where the conditions of repayment are linked to the firm meeting specific KPIs on sustainability factors (e.g. related to environmental performance, such as reducing overall greenhouse gas emissions, or social goals, such as gender parity on boards).
Debt instrument Type of thematic debt Financing mechanism Purpose Dominant sustainability mechanism Applicable transnational standards Transparency
Bond Sustainable or green Capital market Project finance Ex ante ICMA Sustainable Bond Guidelines, Green Bond Principles, CBI Rules on prospectus disclosure
Sustainability-linked General finance Ex post ICMA Sustainability-Linked Bond Principles
Loan Sustainable or green Direct financing Project finance Ex ante and ex post Green Loan Principles (GLP), Social Loan Principles (SLP) No applicable rules
Sustainability-linked General finance LMA/LSTA Sustainability-Linked Loan Principles (SLLP)
Table 1: Universe of sustainability-labelled debt instruments
Globally, two market standard-setters have developed frameworks for sustainable loans and bonds: the Loan Markets Association (LMA) and the International Capital Markets Association (ICMA), respectively. While neither have introduced a mandatory definition of sustainability – either environmental or social – they do identify specific categories of projects or indicators that delimit sustainability concerns, e.g. related to renewable energy, affordable housing or access to basic infrastructure. The Green Bond Principles were published in 2014, with Social and Sustainability Bond Principles following in 2018.
For green bonds, the ICMA’s guidance covers the use of proceeds, the process for evaluating and selecting projects and rules for managing the proceeds and reporting. In addition, the ICMA recommends that a Green Bond Framework (GBF), outlining how the issuer intends to comply with their principles, be developed and disclosed by the issuer. Such disclosure should be verified by an external reviewer with the latter’s Second Party Opinion (SPO) to be published on the issuer’s website. As regards general financing instruments, the ICMA’s 2020 Sustainability-Linked Bond Principles require that the issuer select and calibrate appropriate KPIs and sustainability performance targets (SPTs), define features of the bond on how the financial conditions change when the KPIs are achieved, commit to regular reporting and secure verification of the sustainable finance framework.
As regards loan financing, the LMA’s 2018 Sustainable Loan Principles (SLLPs) and 2020 Sustainability-Linked Loan Principles (SLLPs) established analogous principles. However, they are tailored specifically to lending relationships, and they offer more flexibility as regards the structuring of the loan terms. They also involve less granular guidance on social issues (i.e. there are no dedicated ‘social’ loan principles, as in the case of bond principles). Notwithstanding important differences between the standards, such as the required level of transparency, they share common features. Firstly, sustainable finance instruments require an articulated link to ‘sustainability’ issues – either in terms of projects to be financed or the overall strategic commitments of the borrower to be outlined in a dedicated green financing document. Secondly, the standards and market practice foresee a key role for an external party in reviewing a corporation’s sustainable finance framework in order to assess their compliance with standards and level of ambition. Thirdly, and this aspect is particularly important for the bond market, sustainable finance instruments come with novel obligations related to continuous monitoring and reporting of impact.
In parallel to the development of global market standards, the EU’s sustainable finance agenda was introduced to support the rechannelling of capital flows into sustainable investments and to improve corporate governance through more comprehensively incorporating environmental and social considerations and extending corporates’ time horizons. The EU regulations have directly and indirectly created a system of labels for green and sustainable financial products and services that further substantiate the above-mentioned key characteristics developed by the ICMA and the LMA. The cornerstone of the EU’s approach is the EU Green Taxonomy, which elaborates criteria for activities to be considered ‘sustainable’, while the EU Green Bond Regulation (EUGBR) introduces a voluntary regime for ‘high quality’ bond instruments whose proceeds are meant to finance environmentally beneficial projects. Any issuer – public or private, based in the EU or a third country – can choose to issue a bond in line with the EUGBR requirements. Two aspects of the EU regime are central to its credibility. Firstly, the regulation requires granular pre- and post-issuance disclosures regarding the green financing, the overall strategy of the company and the impact on social aspects, such as just transition. Secondly, a mandatory supervisory regime is established for the external reviewers of such disclosures, whereby the European Securities and Markets Agency (ESMA) is tasked with registering and monitoring compliance of external reviewers of corporate GBFs with principles relating to framework’s integrity and competence. In addition to a binding regime for bonds identified as ‘green’, the EUGBR introduces a voluntary regime for sustainability-linked bonds, that is, bonds whose financial or structural characteristics vary depending on whether the issuer achieves predefined environmental sustainability objectives and links these to an overall transition strategy of the firm. Despite most EU countries being predominantly bank-based systems, there is currently no dedicated regulatory treatment for sustainable loan financing under EU law.
The EU’s intervention in the sustainable finance market extends beyond regulation: European institutions have leveraged their various positions as policymakers and legislators, supervisors and central banks and market participants to facilitate market development. The impact of such multifaceted intervention on individual private financing relationships that are identified as ‘sustainable’ is rarely captured by the legal scholarship. However, the comprehensiveness of the EU intervention provides a unique test case for capturing the law’s potential role in supporting transformation of the socioeconomic system. In the light of these puzzles, the following sections seek to answer two questions. Firstly, how are sustainable finance instruments different from non-sustainable finance from a legal perspective? And secondly, how can any such differences, and the institutional dynamics observed in their context, contribute to our understanding of the law’s constitutive role in the economy and its transformative potential?
3. Constitutive dynamics of law in sustainable finance
That the law shapes and co-constitutes finance, including sustainable finance, is not self-evident. In fact, much of the existing sustainable finance literature treats law as epiphenomenal to the interests and practices of market actors or as an expression of the political preferences of the strongest players. Such perspectives are revealing of political economy dynamics. However, by overlooking the legal environment dimension, they also limit the potential of legal coding as a vehicle for change. Entering into a dialogue with this sceptical perspective offers an avenue to explore what the law is, how the law may be co-constitutive of the economy and where specific features of the law preconfigure market interactions, such as how the legal terms distribute risk and reward.
The existing sustainable finance law is largely composed of mandatory corporate governance (disclosure) and financial regulation, in addition to the emerging transnational and private law rules. A legal institutionalist perspective draws our attention to how these aspects ‘code’ or ‘encase’ specific types of power relationships, values and inequalities. Here the law constitutes market interactions in the sense that it preconfigures and gives form to financial relationships. Specific legal modules, such as contract, property or company law, distribute risk and reward and structure the interaction between actors over time (e.g. via monitoring and reporting obligations). For example, contract law may shift the downside risks to weaker parties (e.g. via limitation of liability clauses), while property law may elevate the claims of specific owners insulating them from losses (e.g. via priority claims). The ‘legal encasing’ of specific economic rationalities – such as those that silo economic and environmental realities – through deploying legal concepts, the role of lawyering and modes of legal enforcement, limits the possible market ordering alternatives within a particular jurisdiction. As Lang proposes, law and legal practices may in different ways be part of the cognitive infrastructures of modern markets, that inform behaviour and are social in the sense they are shared, collectively produced and embedded.
There are different aspects of such legal coding that can be captured by considering the different aspects of the legal environment as proposed by Edelman and Suchman, who have differentiated between those aspects that are regulatory (in the sense of introducing a mandatory set of behaviours), facilitative (in the sense of setting the terms of interaction between actors) and constitutive (in the sense of introducing legal forms and categories). All three of these aspects relate to how law may be (co)constitutive of the financial outcomes, by creating a common framework for institutional interactions. They are also deeply intertwined with each other. From an analytical perspective, this framework offers an elegant way to disentangle the salience of the different types of legal and other governance rules and their relationship to market practice and outcomes.
In addition to differentiating between the aspects of the legal environment of green bonds, as suggested above, sustainable finance instruments – as defined by the international standard-setters and EU legislation outlined above – draw our attention to the pre-contractual and post-contractual contexts that shape firms’ financing choices. To capture how these contexts differ from traditional finance, I analyse green bonds across three phases of the financial instrument lifecycle: negotiation, contracting and enforcement, with the latter category spanning monitoring, marketing and public oversight. Seeing sustainable finance law over time allows to explore how the different aspects of the legal environment shape and sustain specific forms of (extractive) capitalism centred on profit and logics of accumulation. In addition, an extended temporal view can more inclusively capture not only the legal coding of green finance, but also how intermediaries and non-legal professionals facilitate legal endogeneity, that is how legal provisions become law in action.
The analytical perspective, which is summarised in Table 2, builds on other explorations of the transformative potential of law, in that in addition to the immediate function of law, it also looks at how the (private) legal relationship is irrevocably intertwined with the different ways of lawyering (i.e. who and how gives substance to the sustainability-related obligations between parties) and law-making (e.g. the role of the macrofinancial regime and financial supervision in shaping behaviour). In so doing, this article expands on the legal institutionalist approaches and draws on a broader regulation perspective, in that it considers not only the direct and indirect changes in debt relationships in the context of sustainable finance standards, but also considers the other measures that shape actor behaviour (i.e. self-regulation and macrofinancial regimes). The focus on private debt relationships additionally complements the transformative law debate on direct public and planning interventions in market ordering. This perspective allows us to explore the role of law in expanding or constraining new ways of incorporating the social and environmental objectives whose pursuit is to be financed, as well as to differentiate between them.
Legal environment aspect Analytical question Relevant legal environment aspect of green bonds (examples)
Regulatory control-and-command law with organisational responses defining compliance How are the rules for behaviour affected? contracts, corporate law, confidentiality laws, product standards, enforcement rules
Facilitative tools for interaction and dispute resolution in an organisational context What are the tools/processes shaping interaction between actors? negotiation, monitoring, marketing
Constitutive legal forms and categories that help define the nature of organisations What are the foundational properties? definitions, default rules, roles and responsibilities
Table 2: Legal environment aspects of sustainable debt
4. EU green bond issuances: Everything has to change so that nothing changes?
This section explores four dimensions of green bond development: the structure and legal framing of green bond prospectuses and documentation; the shifting dynamics in the negotiation process, including new actors and motivations; the post-issuance practices of monitoring and marketing that define the governance of these instruments; and the positioning of green debt within the context of macro-financial policy regimes. Each dimension sheds light on how law is being stretched, reshaped or bypassed to accommodate sustainability goals.
The findings in this section draw on the prospectus terms of 35 green bond issuances in the Netherlands, Spain, Sweden and Poland from 2019 to 2024, i.e. the period before the EU Green Bond Regulation entered into force. The analysis of green bond documentation was supplemented by 18 semi-structured interviews with lawyers, bankers and representatives of the broader ecosystem (public authorities and civil society organisations). The interviewees were identified on the basis of their direct involvement in the structuring of green bonds as lawyers or bankers. The insights from the interviews were used to probe the validity of the inferences from the comparative legal analysis, e.g. by gauging the market participants’ interpretation of the legal terms and their assessment of the evolution of green bonds over time.
A. Green bond prospectuses and accompanying documentation
Sustainable finance debt instruments, such as green bonds, are characterised by three key innovations when it comes to the terms of issue included in the prospectus and the accompanying documentation. Firstly, the final terms of issue include references to sustainability performance and new types of issuer obligations. Secondly, the borrower outlines the disclosure commitments in dedicated sustainable or green finance frameworks (GBFs) and regular reports. Thirdly, green bond issuances are accompanied by the SPOs by external reviewers, which are separately disclosed by the issuer and may be referenced in the prospectus terms.
The legal terms of sustainable finance are enshrined in loan contracts and bond indentures. The publicly available bond documentation allows to analyse how some of the aspects of the legal environment shape the legal terms contained therein. What formal rules, related to contract, corporate or property (investor protection) law, shape the provisions on sustainability obligations in the terms of financing? How detailed are the definitions of specific sustainability considerations? In what ways do the provisions relate to different stakeholders?
A comparative analysis of bond prospectuses reveals the issuers’ inconsistent integration of sustainability commitments. From a regulatory legal environment perspective, this suggests that even where most issuances follow the ICMA’s Green Bond Principles, the absence of mandatory rules regarding precisely how the sustainability objectives of the issuance relate to the terms of issue creates room for very different legal forms. In terms of integrating a green bond into the binding elements of a bond issue, the analysed prospectuses most commonly mention that the green bond use of proceeds is the ‘reason for issue’, or they refer to a separate ‘use of proceeds’ section which clarifies that the proceeds (or an equivalent amount) will be used to finance green projects in the disclosed bond terms. The level of commitment varies: generally, issuers ‘will’ use the proceeds to finance eligible green projects, although several issuers use lighter language, for example, referring to an ‘intention’ or explicitly allowing for the fungibility of funds. Only in five Polish bond issues was the green use of proceeds identified as a legally binding ‘purpose of issue’. In one case this was supplemented with a Supervisory Board resolution that further shores up the commitment. Such strong legal encasing of the commitment stems from local investor protection laws which foresee criminal sanctions for deviating from the stated purpose of issue. For sustainability-linked debt, where the achievement of specific targets is linked to structural features, the provisions are more detailed across jurisdictions.
From a regulatory perspective, the legal environment plays a role in shielding the terms of issue against the sustainability commitments limiting the liability of the issuer for underperformance in this regard, as the green bond prospectuses are rife with waivers and disclaimers. Such disclaimers focus especially on clarifying the limited scope of ‘forward-looking’ statements, the possibility of not meeting investor expectations regarding environmental performance and limiting the borrower’s liability for future contingencies. The waivers insulate from liability the issuer, dealers and providers of external verification services, although the disclaimers are much more detailed in the context of developed financial markets (e.g. Sweden or Netherlands) than in less developed ones (e.g. Poland).
The constitutive legal environment, relating to how the understanding around the sustainability features of projects is constructed and shared by the stakeholder involved, appears highly fragmented. Few issuers include specific definitions of environmental considerations in the terms of issue or refer to EU rules that include such definitions. In fact, many bond issues include phrasing in which the issuers emphasise that there is no common understanding of what activities are sustainable, only to follow this statement with a reference to the EU taxonomy. For example, in one Swedish bond issue, a reference to the EUGBR and the EU Green Taxonomy is followed by a statement that ‘both of these initiatives are still under development and it is not clear to what extent they, or other developments in market practices or regulatory requirements in the area, will impact the Green Terms and/or the Company.’ Similar wording is found in most of the bond issues from multinational firms.
Moreover, references to what issuers mean by sustainability is often found in greatest detail in the risk section of the prospectus, rather than the sections that outline the purpose for seeking financing. Here, sustainability definitions are at times even considered to be a risk factor. The Swedish company Cibius, for example, in its 2024 prospectus alerts potential investors to the losses that non-compliance with EU regulations can bring about in directly financial or reputational terms, even while making tentative pledges to comply with the standard. It appears easier to apply the EU sustainable finance framework in Poland and Spain – at least according to the information disclosed in the prospectuses. The 2023 issue from the Polish bank Pekao includes commitments to follow the Green Taxonomy classifications when selecting eligible projects to be financed, without qualification. The Spanish bank BBVA, meanwhile, refers to its internal efforts to follow that regulation.
This tension regarding the foundational aspects of sustainable finance extends to how the green financing frameworks are (not) being incorporated into legally binding terms of the prospectus. As part of GBFs, the borrower commits to specific governance procedures regarding the selection of projects (including cross-business line coordination) and their management (including tracking of the use of proceeds and audits thereof). For sustainability-linked debt, the documents disclose the relevant KPIs, such as greenhouse gas emission reductions in CO2e or energy efficiency savings in MWh, as well as the calibration of SPTs, which should correspond to a material improvement in performance along a predefined timeline. In addition, a key feature of the sustainability-linked products is that borrowers disclose specific financial and structural characteristics, including variation of the coupon linked to specific coupon events. Both types of green financing frameworks include details on reporting (including its frequency) and external verification throughout the lifecycle of the financing. Despite the prominence of the GBFs as a key feature of sustainable financing, their link to the legal terms of financing differs across the bond prospectuses. EU issuers typically refer to the GBFs in the prospectuses, despite excluding them from the list of documents incorporated by reference (such as annual financial reports). Investors ‘should have regard’ for GBFs, though they create no legal obligations. The issuers also shield themselves from any deviation from the use of proceeds under GBFs, emphasising that such situations should not being treated as an event of default. However, the more recent issuances across jurisdictions, and, as mentioned above, those in Poland, show that it is possible to more directly integrate the documents outlining the commitments and the terms of issue.
Despite the above-mentioned limitations, several types of contractual innovations with regard to sustainability-themed financing differentiate it from traditional forms of financing. Firstly, notwithstanding the limitations described above, bond issuers do include information related to their green and sustainability performance in their prospectuses. This may be either a reference to the GBF or other information related to decarbonisation pathways. Even where the prospectuses explicitly deny incorporation of these documents, they evidently create expectations in the investors. In the case of sustainability-linked bonds, the issuer’s terms of issue include step-up or step-down provisions. This information is subsequently integrated into the marketing of the instrument on secondary markets. Secondly, there were a few examples of contractual sanctions in the terms in the prospectus. Several Polish prospectuses explicitly provide for early redemption of bonds if the issuer does not use the proceeds in accordance with the green purpose.
As far as the legal encasing of sustainable corporate debt is concerned, there is evident tension in the regulatory legal environment incorporating sustainability. On the one hand, GBFs and references to them in the prospectuses’ terms of issue clarify the link between the financing and environmental or social impacts of firms’ activity in a quasi-regulatory way. In some jurisdictions mandatory provisions related to the terms of green debt have been introduced. On the other hand, the legal incorporation of a GBF into the prospectus is often denied, with waivers and disclaimers explicitly limiting the liability of the borrower for achieving the outlined goals. This suggests that the law’s co-constitutive role entails fragmenting the understanding of sustainability and shielding the actors involved from performance-related obligations. At the same time, even where the pre-existing regulatory environment struggles to grapple with the new types of obligations (and time horizons) of mutual commitments between the lender/investor and the borrower, the emerging regulatory standards result in (often disclosed) documentation that effectively becomes an integral part of mutual expectations. This begs the question of how tenable should be considered the waivers and disclaimers in formal documentation. Taking into account the negotiation and preparatory stage of sustainable finance, as well as the subsequent monitoring and marketing, can shed light on potential sites of legal environment transformation.
B. Negotiating green bonds: New voices in the room
Given the relative freedom involved in determining the terms of debt financing, the negotiation stage is broadly recognised as important and contingent on specific features of the borrower and the financing in general. An understanding of the normative dimension of green bond terms is therefore incomplete without a analysis of how what preceded it – the negotiation phase – differs from the way in which financing would normally have been arranged. This aspect’s importance is suggested by the emphasis that the standards for sustainable finance place on the development of the GBF, including the detail on project selection and management it entails, and by the role of external reviewers. What brings firms and banks together and motivates them to discuss sustainable finance instruments? How does the facilitative legal environment shape the green bond terms?
With regard to the regulatory and facilitative aspects of the legal environment that shape the motivations and roles of actors, the literature points to how banks and companies engage in sustainable finance for different reasons – reputational benefits, cost of capital or broader strategy implementation – without differentiating corporate governance or investor protection regimes. However, interviews with market participants suggest that there are important distinctions in the actors’ motivations that relate to law: for example, interviewees involved in Swedish issuances prioritise corporate governance rules, whereas in other jurisdictions it is rather the reputational and compliance considerations. In addition, it is often the financial institutions that, e.g. due to investor demands or supervisory concerns, ‘nudge’ clients towards sustainable product offerings, as opposed to the other way round.
Sustainable finance and the legal standards that shape it trigger shifts in the roles that affects more than the way the actors are brought together. Firstly, for sustainable finance transactions involving numerous financial institutions, a new role of sustainability coordinator has been created. This designated bank is tasked with a leading role in negotiating the sustainability-related aspects of the terms of issue, which requires a dedicated type of expertise on sustainability within the organisation. Secondly, new actors gain influence over the type of projects that are to be financed. Specialised sustainability experts have emerged to provide external verification of the sustainability pledges outlined in GBFs of the firms seeking ‘sustainable’ financing. Such services take the form of second party opinions (SPOs), assurance or ESG ratings, which may inform the structure of sustainability-linked financing for example by being linked to specific step-up or step-down events triggering changes in coupon rates. In this way, (new) external parties become an integral part of the financing relationship up until the maturity of the debt, where they verify subsequent reports from the issuer or adjust the ESG rating of the company.
These transformations draw our attention to the dynamics of differentiation (vis-à-vis traditional finance) and expansion (in terms of the greater inclusivity of the process) in the legal environment of sustainable finance. Sustainable financing involves two important changes as compared to traditional negotiations: firstly, it accords a special place to sustainability topics as part of the discussion of mutual expectations; secondly, it involves new roles and actors. Both these changes are relevant and consequential from the perspective of exploring the constitutive role of law in sustainable finance, where they alter the facilitative legal environment and are intertwined with the regulatory aspects, such the corporate governance regimes that frame the motivations of the actors. With the new motivations of borrowers and lenders comes the demand for new kinds of knowledge, namely sustainability knowledge. Such expertise is not external to the negotiation process, as might have been the case in the past (e.g. for technical expertise relating to the project’s feasibility), but becomes an integral part and object of the discussions – the facilitative dimension of the legal environment thus contributes to laying the foundations for green bonds as a distinct financial instrument.
C. Monitoring and marketing of green bonds
The sustainability performance of the corporations issuing green bonds is another area where we can identify distinguishing features of sustainability financing that influence and are influenced by the legal environment. Even the concern about greenwashing, so often raised in the context of sustainable finance, is evidence of increased scrutiny over the corporate bonds’ financing terms as well as of increased access to information about the firms’ environmental and social performance. As in the case of sustainable finance negotiations, the facilitative environment of green bonds following the issuances differs from that of ‘traditional’ financial instruments.
Following the conclusion of a contract and the issuance of debt, sustainable finance instruments are distinguished by the bespoke external governance regime that relies on monitoring and marketing rather than judicial routes. Cases of private enforcement related to sustainable finance instruments are almost non-existent, not least because the options for redress for bondholders in the events of breach of sustainability objectives are limited, especially where specific terms are not included in the prospectus or are drafted in an overly vague manner. The EU Green Bond regime, meanwhile, relies mostly on procedural disclosure obligations rather than substantive provisions. As the concerns about the credibility of sustainable finance instruments increase, several potential routes to such litigation by aggrieved investors especially, have been identified in jurisdiction-specific contexts, especially regarding incorrect representations and breach of covenants, linked to intentional or negligent omissions and/or incorrect or defective reporting, for example. Nevertheless, the interviewed legal practitioners were doubtful as to whether claims without an economic loss for the investors stemming from falling short of the ‘green promises’ would hold up in court.
However, as in the case of those processes which precede the issuance of debt, the weakness of the regulatory legal environment for enforcement draws our attention to the facilitative aspects of the roles of different public and private actors and structures in monitoring and marketing green bonds and differentiating such instruments from other, ‘unsustainable’ debt. Exploring the facilitative aspects of the legal environment of green bonds captures two features of sustainable finance that demarcate these instruments from ‘traditional’ financing: the role of monitoring (reporting) and marketing.
As regards monitoring, to the extent that achieving specific sustainability objectives is the raison d’etre for sustainable debt, both ICMA and LMA standards encourage regular reporting. The EU Green Bond regime, while being more prescriptive regarding the pre- and post-issuance disclosures, likewise relies on the disclosure of the relevant information, in line with the broader EU approach to regulating corporate governance in this way. Such impact and allocation reports for bonds are another key differentiating feature of green debt going beyond the standard process of ‘the ongoing acquisition, processing, interpretation, and verification of information about the firm’ known in the context of debt governance. Sustainable finance, therefore, involves greater transparency about the terms of issue and performance through the scope of post-issuance disclosures and the publication of SPOs, which allow not just investors but also interested stakeholders to better monitor the companies’ commitments. Some issuers further follow best practices by seeking and disclosing auditor reports (assurance) on the allocation of their green bond proceeds. While the credibility of such documents may still raise valid concerns (e.g. due to conflicts of interest), the fact that some issuers opt for this option, while others do not, is an important dimension that further differentiates sustainable debt instruments.
In addition to such new forms of reporting, sustainable debt is subject to differentiated marketing practices on secondary markets that effectively create another layer of dedicated sustainability monitoring. Firstly, green and sustainability bonds might be placed on special ‘green’ market segments on exchanges. Most large stock exchanges in the EU now have dedicated sustainable-bond market segments. The inclusion in such a segment may be made conditional on additional, explicit procedures to verify the greenness of issuances. Several issuers explicitly refer in their bond prospectuses to the intention to place the bond on such exchanges. The entry rules – and therefore the facilitative environment of such issuances – differ across markets. Of the four analysed jurisdictions, two exchanges have no explicit additional entry rules. In Sweden, the Nasdaq sustainable debt segment requires that green documentation be submitted as part of a listing’s approval. In Poland, issuers who wish to include their green bonds on the dedicated Catalyst secondary market segment are required to sign and disclose an additional document confirming their sustainability commitments at the entity level. A variant of this secondary market practice is the inclusion or exclusion of a given debt instrument in an ESG index. Benchmark composition methodology may distinguish such debt from non-sustainable finance as well as among green debt, where regulatory standards differentiate different ‘shades’ of sustainability. Effectively, such market mechanisms reinforce the differentiation of sustainable finance products from ‘traditional’ products, encasing the sustainability commitments of firms (through secondary market rules and practices) and shaping their motivations for seeking sustainable debt.
Secondly, financial data providers have begun to include information related to the sustainability performance of the borrower, together with impact information (in some cases), in the offered data products relating to specific financial instruments. Information included spans ESG ratings or scores (e.g. by MSCI, Bloomberg or Sustainalytics) which summarise the firms’ profile, usually based on disclosures. In addition, investors in the green debt product are provided with brief summaries of the overall ESG strategy of the firm (e.g. ‘net zero’/biodiversity strategy, gender inclusion policies or business ethics). Although the extent to which investors may be guided by such information in their financial decisions cannot be determined by such features and services, it is doubtful that commercial data providers would develop them in the absence of any demand. Furthermore, such information impacts the firm through reputational channels, and may subsequently trigger controversies or litigation.
These external governance aspects are particularly important for bond financing, given the limited rights of bondholders (i.e. who have no voting rights as opposed to shareholders), and they effectively become a key part of the facilitative environment of sustainable finance. The rules of the facilitative legal environment identified above relate to secondary market entry conditions, further discussed below, which shape actors’ actions given the potential and actual impact on pricing. Whereas typically dispersed ownership is considered to loosen the covenant monitoring incentives, in the case of green bonds, we can identify a governance through ESG dimension, that is, governance through classifications and inclusion in dedicated market segments. The legal environment of the micro-level firm–finance relationship shapes and is shaped by new meso-structures that differentiate actor performance, facilitate interactions and – to a certain extent – serve to further substantiate the sustainability commitments of actors.
D. Green bonds in macrofinancial policies
How green bonds are treated by central banks and financial market supervisors constitutes another key dimension of the facilitative legal environment shaping these instruments, yet it is often overlooked in legal analyses of sustainable finance. Meanwhile, legal institutionalist perspectives have long pointed to the hybridity of finance – the blending of public and private law elements that enable private actors to create enforceable financial claims with state-backed legal authority – as a key feature of the legal coding of capitalism. Policies shaping the overall macrofinancial regime – for example, monetary policy calibration, prudential regulations and market conduct oversight – shape the legal environment of sustainable finance along all the analysed dimensions: the regulatory, the facilitative and the constitutive. As in the case of green bond documentation or negotiation practices, we can identify several ways in which central banks and supervisors develop dedicated green bond practices (or not).
Central banks, supervisors and regulators may react in differ ways to innovation in the market. They can adapt to the new challenge, for example, by providing guidance and expectations as regards the sustainable finance practices. Or they can adopt a position of forbearance: observing the market developments from a distance. So far, most of the financial authorities have adopted the latter approach. Efforts to further align market practice, especially by providing a framework for differentiating the supervision of sustainable issuances under the common rules, were made largely by EU agencies, such as the European Securities and Markets Agency, and are limited to identifying specific elements of green bond frameworks that supervisors should be paying attention to.
Arguably, however, in the EU we have observed that most detailed guidance regarding sustainable finance products is generally developed not by the supervisors, but rather the prudential and monetary policy authorities, especially by the European Central Bank. The EU macrofinancial regime increasingly allows for favourable treatment of sustainable issuances for prudential or monetary policy purposes, e.g. by extending to these instruments eligibility criteria for specific policies, which subsequently feed across the dimensions of the legal environment. For example, the European Central Bank developed a dedicated treatment of sustainability-linked bonds that has resulted in information on whether the financing meets the ECB’s standard being included in both the ICMA Principles and investor platforms. Such explicit reference suggests the ECB’s framework is material to shaping actors’ decisions. Further, following a 2024 reform of EU prudential rules, prudential supervisors are required to consider the sustainable finance products offered by banks in their assessment of the adequacy of internal risk management. Such measures create incentives for the EU’s financial sector to actively promote sustainable finance products among their clients.
These practices of key public actors within the EU’s macrofinancial regime may therefore shape the supply and demand for green credit in the pursuit of a sustainable future. They restrict financial market actors, constituting the relationships between the borrower and the creditor in a particular way and granting a privileged position to sustainability considerations. Since the Great Financial Crisis, regulations across the globe have regulated finance in an increasingly granular way, in particular restricting socially harmful risk-taking and requiring banks to make further provisions for cases of instability. However, this transformation is not such a foregone conclusion as the pushback against prudential regulation in general and ESG in particular (e.g. in the USA) suggests. The divergent US and EU trajectories in this regard also suggest that whereas the euro may become ‘the currency of the green transition’, the dollar is less likely to see a similar transformational push. In the context of the legally constituted hybridity of money, such differences in the macrofinancial regimes only reinforce the observation that they are a key feature of the legal environment shaping sustainable finance, and therefore integral part of law and finance’s co-constitutive dynamics more broadly.
5. Dynamics of sustainable law and finance co-evolution
The analysis of green bond issuances in the EU draws attention to several dynamics related to the co-constitutive role of the law. Firstly, the formal terms of the issue confirm the role of the legal structure in encasing the terms of the risk and reward in finance. The difficulty in integrating sustainability considerations into the formal legal terms highlights how the law serves to encase the perceived trade-offs between sustainability objectives and profit within the prevailing system of capital accumulation. Legal modules such as corporate governance regimes and confidentiality rules serve to insulate finance from broader accountability and enforcement. However, such encasement is not absolute, and indeed it depends on the broader legal system, including that related to investor protection and corporate governance. In addition, the cross-jurisdictional variance at play in the prospectuses studied, suggests that legal institutions are highly contingent on the broader political economy, including the relative strength of non-market forms of coordination between market actors. At times legal institutions appear to isolate actors through partitioning and waiving responsibility, for example through provisions that entrench the differences in interests and undermine mutual responsibility and accountability for the delivery of environmentally and socially beneficial projects. Since these are key legal institutions related to property and contract law, it appears that the same features which give the law its constitutive function may preclude its role in supporting the collaboration that the sustainability transition requires, unless they are reformulated in collaborative, rather than fragmenting, terms.
Expanding the analysis beyond the formal terms of green bonds to the different aspects of the legal environment across the lifecycle of the debt instrument provides further insight into the law’s constitutive role, in particular via differentiation from ‘traditional’ finance and expansion of the existing categories. Expansion here relates to the ways in which existing legal notions are stretched to include sustainability considerations, even if this implies tensions within the existing capital coding. Differentiation relates to the ways in which the legal environment supports the emergence of new roles and processes, leading to accentuating the distinct properties of sustainable finance as compared to ‘traditional’ finance. Expansion involves the stretching of existing concepts, processes and definition to include sustainability considerations, even where this entails tensions and internal inconsistencies. Differentiation involves new concepts, processes and definitions. Both aspects are revealing of co-constitutive dynamics of law and finance, leading to different outcomes for sustainable and non-sustainable financial instruments in this context (see Table 3). Such expansion and differentiation are identified in the following ways in relation to the different aspects of the legal environment.
As regards the expansion dynamics, these are most clear in the context of the regulatory and constitutive aspects of the legal environment. Existing concepts, such as the use of proceeds or sanctioning mechanisms, may be expanded to incorporate sustainability objectives, even where this introduces tension with the prevailing accumulation-oriented legal coding. There is nothing inherent in the legal coding of finance that precludes the financing instruments to have a purpose ‘other than profit’. At the same time, prospectuses may draw on safe harbour provisions to erect complex waiver fortifications – though these may actually increase, rather than diminish, market participants’ expectations over time. The co-constitutive role of law here is revealed through the tension between regulatory aspects and the potential for such tensions to be resolved through non-legal means.
The differentiation dynamics emerge first and foremost in the context of the dedicated standards regulating the key features of green bonds, such as a GBF, reporting obligations or external verification. Further, secondary market entry rules are likewise identified as key to regulating behaviour and subsequently feeding back into the legal terms of the issuances. Where such practices operate as well as a vehicle for sanctioning behaviour, the different aspects of the legal environment are interwoven. These features further shape the facilitative environment, and more broadly coordination between market actors, which have more fundamental impacts. The law plays a co-constitutive role in preconfiguring financial transactions not only at the micro-level, but also via the new forms of emerging meso-structures of market monitoring and regulatory intermediation. Furthermore, the differentiating practices of supervisory and monetary authorities are critical in constitutive terms. On the central banking side, (un)favourable treatment may entail the special inclusion of green assets in collateral or asset-purchasing frameworks. On the prudential side, in addition to prioritising climate and environmental risks, supervisors may opt for favourable treatment of green assets for the purposes of risk management in prudential regulation.
Expansion Differentiation
Facilitative ‘sustainable’ roles in financing relationships (e.g. ‘coordinators’ in syndicated transactions) external verifiers and verification processes
Regulatory sanctions for deviating from sustainability targets sustainable finance product standards and secondary market entry rules
Constitutive purpose of issue special treatment of sustainable finance products for supervisory and monetary policy purposes and sustainability definitions
Table 3: Expansion and boundary dynamics in sustainable law and finance
What insights follow for transformative projects of reimagining the law and finance to support social and environmental prosperity? Firstly, the analysis reveals that the regulatory legal environment remains underutilised in several cases: there is room for stronger legal encasing of environmental and social goals. In the case of the EU’s sustainable finance policy regime, this could include further engagement with substantive – rather than purely procedural – aspects of sustainable financing. Legal innovations here, as argued by Park and Agostini, could include a standardised ‘green default’ provision. Furthermore, requiring that GBFs are consistently incorporated into the prospectus documentation would resolve the ambiguity of ‘empty promises’. However, these are still comparatively weaker than the ‘declassification’ or ‘rendez vous’ clauses that exist for sustainable loan instruments. At the very least, the sanction mechanisms – such as early redemption if the proceeds are not used in accordance with the GBF – should be consistently adopted to avoid arbitrage and greenwashing.
Secondly, the identified relevance of the macrofinancial regime for the co-constitutive dynamics of law and finance suggest that a lack of credible differentiation within the macrofinancial regime may undermine the transformation efforts and legal reform agendas. In other words, supervisory forbearance or absence of dedicated monetary policy tools may limit the transformative impacts of sustainable law and finance. Such integration needs to be sufficiently flexible, however, and the inevitable risk and uncertainty that come with the transformation learning phase must be accepted – too strict and narrow an interpretation (boundary reinforcing) can stifle change. The role of the macrofinancial regime is especially important in the context of arguments relating to how more ‘stringent’ legal requirements may disincentivise the uptake of particular legal instruments. Likewise, the existence or absence of a binding Green Taxonomy (providing a classification of ‘green’ projects) or specific bans on ESG integration in financial management impact market trends, both with regard to the type of financial instruments selected (i.e. use of proceeds or general corporate financing with sustainability KPIs) and the overall market dynamics (e.g. the slowdown in sustainable financing in several US states).
6. Conclusions
Taking the example of green bonds, an emerging trend in sustainable finance, this article has contributed to the debate on the co-constitutive role of law in finance by drawing attention to how the different aspects of the legal environment interact with sustainable finance via the dynamics of differentiation (distinguishing sustainable from traditional finance) and expansion (new actors and broader stakeholder involvement). In the context of sustainable finance, the law shapes how market actors interact (facilitation), act (regulation) and share the cognitive infrastructure of the market (constitution). Although formal law has been observed to stifle transformation through waivers included in contract terms in sustainable finance, it is the very fact that these are still the object of negotiation and ex post monitoring that the law, in a sense despite itself, has a transformative effect. From this perspective, the criticism dismissing law as epiphenomenal to sustainable finance is revealed to also stem from a narrow understanding of what the law is and an underestimation of the law’s impact once specific regulations are in place. Legal provisions not only enjoy a special type of authority backed by laws (‘coercive force’), but also shape market participants’ motivations and expectations, leading to various forms of legal innovation. The analysis reveals that co-constitutive dynamics of sustainable law and finance are revealed not just from the formal provisions, but in how green finance changes the terms of interaction and the monitoring of behaviour over time. This finding highlights the need for a more nuanced and dynamic legal analysis capable of capturing the intricacies of this evolving market. From this perspective, the emerging concern with greenwashing should be seen as evidence of transforming expectations, and not just of malpractice.
The approach elaborated in the article and its findings have implications that go beyond the green finance trend, extending to broader integration of society’s concerns in financial instruments. Firstly, they draw attention to how individual financial relationships may be leveraged to pursue an entity-wide (industrial) transformation with regard to environmental as well as social considerations. Secondly, they draw attention to the importance of considering the secondary markets and macrofinancial regimes in understanding the co-constitutive role of the law in finance. Finally, they open up the possibility of different outcomes of such co-constitutive dynamics. While sustainable finance is sometimes conceived of in terms of advancing processes of relentless commodification of environment and social issues, the identified dynamics may offer avenues for engaging with the legal structuring of this phenomenon to explore alternatives to fragmentation and profit-maximisation.
European capitalisms in sustainability transition: the case of green bonds
(2025) Smoleńska, Agnieszka
Abstract
The EU’s sustainable finance agenda aims to accelerate the sustainability transition through the ‘greening’ of finance. How such greening may trigger institutional transformation in Member States is not well understood. However, the political economy literature has elevated the importance of non-market coordination and institutional complementarity in sustainability transitions. The article investigates sustainable finance uptake in four distinct Member States (the Netherlands, Poland, Spain and Sweden). Green bond legal documentation is analysed for three dimensions of firm-finance coordination: exchange of information, monitoring and sanctioning. The micro-level analysis identifies local adaptations that relate to how actors incorporate sustainability commitments and the EU sustainable finance rules into financial transactions and whether they conceive these as a source of risk (the Netherlands and Sweden) or a guarantee of profit (Poland and Spain). One jurisdiction (Poland) is further differentiated by a strong legal sanctioning mechanism resulting from legal factors and the presence of international financial institutions. Notwithstanding local adaptations, several micro- and meso-level transformations are identified, such as the consistent emergence of new forums for both market and non-market coordination. The political economy impacts and micro-level tensions identified in the article highlight how comparative legal analysis can anticipate the sites of broader political struggles.
Keywords: green bonds, comparative political economy, sustainable finance, EU Green Deal, institutional complementarity
Introduction
Framing sustainable finance as a policy regime and a political project reveals the scale of ambition that European Union institutions have associated with a series of interventions orientated at (re)shaping how financial markets across the EU operate (see the introduction by Mertens and van der Zwan in this issue). European Commission documents emphasise the potential of the sustainable finance regulatory agenda, not only to close the investment gap needed to meet the EU’s sustainability goals, but also to achieve a deeper, longer-term transformation involving the adoption of a more sustainable corporate governance regime (European Commission, 2018). Finance becomes a lever pulled to diffuse the green transition and the EU Green Deal across the economy (Mader et al., 2020; Braun and Koddenbrock, 2022, Downey and Blyth, 2025). Can this gambit work? Can the EU’s sustainable finance agenda lead to the institutional transformation of capitalism? To help answer this question, the article investigates the early phases of sustainable finance uptake and EU policy impact across several EU Member States. Drawing on the literature on comparative capitalisms and legal institutionalism, I adopt a micro-perspective, exploring what the legal features of ‘green bonds’, that is, debt instruments issued in order to finance sustainable projects, can tell us about whether – and if so, how – market and non-market coordination dynamics are affected by the sustainable finance agenda.
Two complementary observations found in the literature on different strands of social science are integrated to provide a joint anchor for the analysis. Firstly, effective coordination between private and public actors across various levels of governance is a precondition for transition, as suggested by the sustainability transitions literature (Markard et al., 2012). Secondly, there is a complementarity between coordinated market economies, which are reliant more on non-market forms of coordination between actors, and sustainability transition (Nahm, 2024; Ćetković and Buzogány, 2017). In this context, the article probes firm-finance coordination mechanisms through the legal features of green bond transactions in four different case study Member States (the Netherlands, Poland, Spain and Sweden). Approaches at the intersection of legal institutionalism, regulatory capitalism (Deakin et al., 2017; Pistor, 2019; Levi-Faur, 2017; Grewal, 2017) and comparative political economy (Hall and Soskice, 2001; Teubner, 2001) have long sought to address the question of how legal change intersects with that of social institutions. Continuing this tradition, in this article I focus on green bonds, a novel form of financing where the issuer commits to using the proceeds to finance specific sustainable projects, such as improvements in energy efficiency or installations of renewable energy. Through comparative analysis I explore how the local institutional features related to market and non-market coordination dynamics are reflected in the different dimensions of coordination (exchange of information, monitoring and sectioning) found in the legal terms of green bond issuance. I identify the locally contingent differences that relate to how actors incorporate sustainability commitments and the EU sustainable finance rules into financial relationships and whether they conceive these as a source of risk (the Netherlands and Sweden) or a guarantee of profit (Poland and Spain). The analysis unpacks several micro- and meso-level adaptations that relate to both market forms of coordination (e.g. the role of dedicated secondary markets) and non-market ones (e.g. local ‘platforms’ creating new forums for sectoral and cross-sectoral exchange).
Green bonds are particularly well placed to be studied from the perspective of the EU as a policy regime and a political project, the themes of this special issue. Even before directly regulating this financial instrument through the EU Green Bond Regulation (EUGBR; Ramos Munoz and Smoleńska, 2023), EU institutions have leveraged their various positions as policymakers and legislators, supervisors and central banks and market participants to facilitate market development. At the same time, we have observed relatively little political mobilisation around this instrument compared to other elements of the EU sustainable finance regulation and the EU Green Deal agenda more widely (Bocquillon, 2024; Fontan, this issue). Considering sustainable finance through the lens of individual ‘green’ transactions offers a glimpse into the profiting and powering dynamics the trend triggers, both within a particular country and across the EU as a whole.
The article contributes to the broader literature in the following ways. While comparative capitalisms scholarship has tended to focus on the distinction between coordinated and liberal market economies in evaluating the ‘institutional fit’ with the sustainability transition, here I show how non-market coordination is consequential in the EU sustainable finance context, both in terms of local adaptations and broader institutional transformation. With green bonds having already been explored across a number of fields, spanning finance (Lam and Wurgler, 2024), geography (Monk and Perkins, 2020; Perkins, 2021) and law (Ramos Munoz and Smoleńska, 2022; Curtis et al., 2021), by analysing these instruments with an additional level of granularity, I show green bonds to be heterogenous and institutionally contingent. Methodologically, the article proposes an original analytical approach that combines legal institutionalism with comparative capitalisms scholarship. I show how law and legal documentation matter for the study of political economy, not just in terms of how local legal structures affect the implementation of sustainable finance policy (Steunenberg and Toshkov, 2009), but also how a combined law and political economy approach can capture institutional change beyond micro-interactions. In fact, the micro-perspective adopted in the article generates insights for the broader meso- and macro-financial regime, especially as regards the transactions that underpin the ‘greening’ of credit flows (Gabor and Braun, 2025). From a public policy perspective, the insights allow readers to anticipate the dynamics of EU regulation implementation across the Member States (Brendler and Thomann, 2023) and to formulate complementary local policies to support the achievement of policy objectives (Pistor and Berkowitz, 2003).
To this end, the analysis proceeds as follows. The following section explains how social science scholarship to date has explored the question of institutional fit in the context of EU policy in general, and sustainable transition in particular. Then, I outline the research strategy, which combines legal and comparative political economy methodologies. The next section explains the importance of green bonds in the EU’s sustainable finance agenda, after which I outline insights from the analysis of green bonds’ legal documentation as regards firm-finance coordination in the transition. On this basis, and before concluding, the following sections explore the institutional adaptations in micro- and meso-coordination dynamics triggered by the sustainable finance trend and draw broader insights for powering and puzzling dynamics triggered by the EU’s sustainable finance policy regime and political project.
Institutional transformation in sustainability transitions – an empirical-theoretical puzzle
Can the EU’s sustainable finance policy regime, as a political project, bring about a transformation of socioeconomic models in line with the objectives of the sustainability transition? Despite the growing interest of social science scholars in the phenomenon of sustainable finance, its transformative potential is met with broad scepticism (Babic, 2024; Buller, 2022; Brett, 2024; Green, 2023, Newell, 2021). Green financing instruments are criticised for a lack of additionality (Lam and Wurgler, 2024), a lack of clarity in their purpose (Zetzsche and Sorensen, 2022), ‘empty promises’ (Curtis et al., 2022) and as a market-making façade (Perkins, 2020). And yet they involve several novel features: new types of categories (e.g. ‘green’ projects), obligations (e.g. green ‘use of proceeds’) and sanctions (e.g. financial ones). Plus ça change…? As the share of green financing grows, especially within the EU, the puzzle of sustainable finance is transforming into an empirical puzzle as much as a theoretical one. Why are some countries more interested in green finance than others? What should we make of the differences between green bond practices across jurisdictions? Considering the potential differentiated institutional fit of sustainable finance’s impact is key, given the centrality of this approach in the EU’s Green Deal, notwithstanding the spectre of regulatory rollback as the competitiveness agenda in Brussels begins to gain ground (Financial Times, 2025).
Political economy scholars have begun to approach sustainability transition policies from a comparative capitalisms perspective. They have pointed to the underexplored question of how sustainability transitions affect the supply and demand dynamics underpinning individual growth models and the long-lasting impact of national governance tendencies on policies implemented in the service of transition (Feola, 2022, Newell, 2021, p. 34). In a recent contribution, Driscoll and Blyth propose that countries’ ‘decarbonisation possibility frontier’ can be identified as a function of a cost of capital and share of fossil fuels in energy consumption (2025). Bailey points to the underdeveloped understanding of how decarbonisation policies affect the alignment and coordination of varying interests (2024, p. 100853;), an aspect that appears particularly critical in the light of the sustainability transitions literature, which emphasises strategic horizontal and vertical coordination between public and private actors over longer periods as a precondition for shifting socioeconomic models into a more sustainable gear (Markard et al., 2020, 2012, p. 957). Accelerating the transition means that actors across the economy – the state (through industrial policy), the finance sector (through lending decisions) and businesses (by adjusting business models) – all must accelerate their decarbonisation efforts and align. But what kind of non-market coordination matters, and how? Non-market coordination refers here to a broad array of mechanisms for coordinating behaviour and interests that are not reliant on market supply and demand, but rather rely on networks, joint membership of associations, forward-looking planning and state policy (Hall and Soskice, 2001). The comparative capitalisms literature has already suggested that socioeconomic systems relying on non-market forms of coordination between actors foster collaborative, broad-based innovation that is coordinated and locally embedded government–industry–finance–science–society interactions, whereas the absence of non-market coordination between actors has hindered renewable energy development in the UK (an LME, Liberal Market Economy) (Bernauer and Bohmelt, 2013; Lachapelle and Paterson, 2013). Institutional complementarity is consequential, as Nahm argues ‘some EU varieties of capitalism face less structural constraints than others and are thus better equipped to achieve economic, social and environmental benefits from advancing renewable energy sectors’ (2021, p. 652). Conversely, weak institutional complementarity and structural constraints on non-market forms of coordination, such as low transparency and limited state capacity, have been identified as stumbling blocks to the transition (Ćetković and Buzogány, 2017).
Understanding these dynamics is crucial for capturing the impact of the EU’s sustainable finance agenda. The literature on Europeanisation has considered how institutional factors shape the strategies and positions of actors over the course of EU policymaking (Fioretos, 2001; Callaghan and Höpner, 2005; Quaglia, 2011; Clift and McDaniel, 2021) or the local implementation of EU policy (Borzel, Loxbo and Pircher, 2024; Thomann, 2019; Zhelyazkova and Thomann, 2022; cf. Blom-Hansen et al., 2022). However, our understanding of how EU policy co-evolves with local institutions and practices, also at the micro-level, is underdeveloped. Capturing the impact of the sustainable finance agenda requires delving deeper into the dynamics of political economy transformations that are triggered by EU financial policies at the level of firm-finance interactions (Moschella et al., 2024; Braun and Koddenbrock, 2022). To achieve the aims of the political project, such a transformation would require the consistent integration of sustainability considerations across different dimensions of strategic interactions of the firm vis-à-vis the local corporate governance regimes, industrial relations, labour force education and training and modes of innovation diffusion (Hancké et al., 2007; Green, 2022).
In this context the law’s potential to generate political economy insights is underexplored, and legal analysis can be particularly fruitful when applied to political economy in the context of sustainable finance. Following the varieties of capitalism approach, a micro-level analysis of actor interactions can generate insight into the broader workings of the socioeconomic system (Molina and Rhodes, 2007). The law constitutes such interactions in capitalism in the sense that it preconfigures and gives form to economic relationships, including financial ones (Deakin et al., 2017, Hodgson, 2015). Specific legal modules such as contract, property or company law, ‘code’ capital, e.g. by pre-setting the distribution of risk and reward among actors and structuring the latter’s interaction over time (e.g. via monitoring and reporting obligations) (Pistor, 2019). ‘Legal encasing’ of economic rationalities through the deployment of legal concepts, role of lawyering and modes of legal enforcement, limits the possible market ordering alternatives within a particular jurisdiction (Lang, 2013, Slobodian, 2018, Kampourakis, 2022, Sassen, 2000, Purdy et al, 2020). Teubner’s seminal work on ‘legal irritants’ in the 2001 Hall and Soskice volume explored how a legal concept tightly interwoven with social institutions (namely ‘good faith’ referring to the intention of parties entering into a contract) results in different outcomes in more ‘liberal’ versus ‘coordinated’ market economies (2001). What is encased in formal legal provisions (market coordination) is a reflection of the broader institutional context, including strategic (non-market) interactions. Even in the cases of globalised financial trends, such as green bonds, we can expect contractual and other forms of local institutional adaptations, especially as regards the legal encasing of the issuing firms’ ‘green commitments’ to finance a specific project within their broader sustainable corporate strategy. Legal analysis can in this sense reinforce political economy analysis by unearthing the micro-level tensions that may, as indeed in the case of the EU sustainable finance political project, anticipate the sites of broader political struggles.
In the light of the existing comparative capitalisms literature, two hypotheses can be formulated as regards the EU’s sustainable finance agenda as a political project supporting the sustainability transition. The first is that countries characterised by stronger non-market coordination, resulting in a greater alignment of interests between actors, might be receptive to integrating sustainability in firm-finance relationships, however this may occur outside of formal legal transactions (Ćetković and Buzogány, 2017, Grittersova, 2014). The second is that the countries with ‘weak’ non-market coordination and institutional complementarity will see the public authority (state or EU) play a more active role to overcome constraints in firm-finance relations (Bulfone, 2024), where growth of sustainable finance is identified as a public policy objective.
Research design
Legal analysis of green bond documentation
Green bonds are particularly well suited to be explored from an institutional perspective. Bonds are debt securities where the borrower (issuer of the bond) promises to pay the holders a fixed amount of interest over a period of time and to repay the full amount of the loan at maturity. Green bonds, the rise and origins of which are further discussed below, are differentiated from ‘traditional’ bonds by several features. Firstly, whereas traditional issuances raise funds for unspecified, general financing purposes, green bonds’ use of the proceeds is for specific, defined sustainability purposes, such as building a renewable energy installation or improving the energy efficiency of a building. Secondly, the issuer develops and discloses a green bond framework (GBF) that specifies the types of projects that will be financed, the way that projects will be selected and any regular reporting on the use of proceeds. These documents are not intended to be legally binding, but rather serve as a framework to communicate the firm’s sustainability investment strategy. Thirdly, external experts typically verify the GBFs for their accuracy and integrity. These analyses are likewise published on company websites and are known as second party opinions (SPOs). Bonds, as public offers of securities or when the securities are admitted for trading on a regulated market (such as exchanges), generally require a prospectus that includes the legal commitments of the issuer as regards the terms of the bonds.
How the differentiating features of green bonds are integrated into the prospectus is a reflection of local firm-finance interaction, including the negotiations between the issuer and the banks structuring the transaction, potential investors and other stakeholders who might use the information to engage with the firm on sustainability-related topics. A comparative analysis of the prospectuses is therefore expected to generate insight into how sustainability can become integrated into firm-finance market interactions. Such coordination can be conceived to have three dimensions: how actors exchange information, monitor behaviour and performance and how they sanction behaviour (Ostrom, 1990, as cited in Hall and Soskice, 2001, p. 10). The first dimension of comparison, namely the exchange of information, relates to the extent and type of information covered in green bond prospectuses about green commitments. The second dimension of comparison relates to the monitoring aspects, including any commitments to regular reporting that the issuer makes as part of the legally binding documentation. The third dimension explores the references to the sanctioning mechanism for violating the green terms of the issuance, if any.
There are several qualifications related to an approach which focuses on green bonds specifically as a proxy for market and non-market institutional transformation triggered by the sustainable finance agenda. Firstly, if green bonds are a form of market contracting, what insight can they offer into non-market forms of coordination between actors? Given the heterogeneity of practices, quite a lot, it turns out, especially combined with other social science methods to contextualise the legal provisions. Secondly, green bonds’ contribution to the transition has been contested. In fact, research draws attention to the ‘empty promises’ of green bonds, or the misrepresentation of the green commitments that undermines their ‘additionality’ (Curtis et al., 2023; Lam and Wurgler, 2024; Agostini, 2023). Such criticism, however, often focuses on a few jurisdictional examples and does not account for the broader context within which such financing is obtained. Thirdly, the relevance of green bonds across different countries will be shaped by the specific transition financing needs in each one. While sustainability transition goals, such as ‘climate neutrality’, are formulated jointly at the EU level, the differences between countries’ trajectories are significant. The national transition pathways are defined by local politics as well as societal (e.g. transition alone) and geopolitical (e.g. energy security) concerns (Ámon et al., 2020). These result in different combinations of transition financing needs, whether that is financing for innovation or decarbonisation or write-offs for stranded assets (Ember, 2024; Semeniuk et al., 2022, Driscoll and Blyth, 2025). Though the transition pathway will indeed determine the ambition or popularity of green bond issuance (relative to other sustainable finance instruments), we can expect to still be able to distil the locally shaped features of such instruments.
Case selection
In this article I compare green bond issuance in four non-liberal market economies in the EU: the Netherlands, Spain, Sweden and Poland. The case selection reflects the article’s hypotheses regarding the implications of the ‘strength’ of non-market mechanisms of firm-finance coordination and the related role of the state. In the comparative capitalisms literature, the Netherlands has typically been considered a ‘traditional’ CME, with Sweden, Spain and Poland falling into the bespoke ‘Nordic’, ‘Mediterranean’ and ‘Central Eastern European’/‘dependent’ types, respectively. As regards the overall institutional fit impacting the outcomes of strategic coordination, the literature generally argues that Sweden and the Netherlands have more complementary institutions, whereas in Spain and Poland the complementarities are ‘weaker’, with fewer formats for non-market coordination and stronger segmentation across sectors (Mykhnenko, 2007). Weaker institutional complementarity is compensated for by a greater role of the state/public authority. In Spain, the state has been characterised as an ex post mediator between the interests of the firm and that of finance, supporting ‘capital coalitions’ and mutual accommodation (Burroni et al., 2021; Molina and Rhodes, 2009; Amable, 2003). In Poland the policies of ‘comprador’ banks have supported the emergence of an aligned state-bank developmental agenda (Naczyk, 2022), notwithstanding the continued capital constraint and underdeveloped local capital market (Nölke and Vliegenthart, 2009; Farkas, 2020; Ćetković and Buzogány, 2017; Bohle and Greskovits, 2019; Rapacki, 2019). Meanwhile in the case of Sweden and the Netherlands, the literature generally characterises the state’s role in firm-finance policy as more ‘hands-off’ (Lindgren, 2011), also in the light of strength of strategic coordination between industry actors.
Data sources
In terms of data sources, I analyse 31 green bond issues in the selected Member States from 2019 to 2024, i.e. the period leading up to the EU Green Bond Regulation’s entry into force, when the EU’s sustainable finance political project was already taking off (Supplementary Material 1.A). To maximise the sample size of the prospectuses, I adopt a broad approach that includes the finance, energy, retail and manufacturing sectors, excluding only local government and state bond issues. The prospectuses were obtained from the issuers’ websites or regulatory databases. Where issuers tapped the bond markets multiple times, I considered the differences between the prospectuses to capture market evolution over time and the impact of EU sustainable finance agenda.
The analysis of green bond issuance was supplemented by 18 semi-structured interviews with lawyers, bankers and representatives of the broader ecosystem (public authorities and civil society organisations) (see Supplementary material 2). The interviewees were identified on the basis of their direct involvement in the structuring of green bonds as lawyers or bankers. The insights from the interviews were used to probe the validity of the inferences from the comparative legal analysis, e.g. by gauging the market participants’ interpretation of the legal provisions and their assessment of the evolution of green bonds over time. The desk research covered policy briefs, market analyses and the existing legal and political economy literature.
Green bonds in the EU’s sustainable finance policy regime and political project
Green bonds are a market and regulatory phenomenon shaped in several ways by the EU’s sustainable finance policies. Supporting sustainable debt issuance has been at the core of the EU’s sustainable finance agenda since the European Commission’s Sustainable Finance Action Plan (European Commission, 2018) – even the EU Green Bond Regulation was only introduced in 2023. The Regulation introduces a bespoke, yet voluntary, regime for requirements that issuers would have to fulfil in order to label their bonds as ‘EUGBs’ (Ramos Muñoz and Smoleńska, 2023). Such requirements include financing projects that are considered sustainable under the EU green taxonomy (Fontan, this issue), a suite of mandatory pre- and post-issuance disclosures and a supervisory regime for providers of external verification services.
As a policy regime, the EU’s sustainable finance policy had affected the issuance of green bonds even before that piece of legislation was in place. In fact, the EU institutions have leveraged their various positions – as policymakers and legislators, supervisors and central banks and market participants – to facilitate market development. The European Investment Bank issued the inaugural Climate Awareness Bond in 2007 and was subsequently a key actor in the EU regulatory process (Spielberger, 2024). In 2020 the EU became the single largest sovereign issuer of green bonds under the NextGeneration EU pandemic recovery fund joint issuance (Smoleńska, 2025). On the regulatory front, the 2020 EU Taxonomy Regulation was introduced with sustainable finance product design in mind. By 2023 green bonds accounted for almost 7% of all corporate bonds issued in the EU, almost double the global average of 3% (EEA, 2024). However, we can observe significant variance in the uptake and development of sustainable finance products across Member States, as reflected in the trajectories of sustainable finance’s development across the case study jurisdictions (Table 1).
Swedish banks and corporations were early adopters of sustainable finance. The Swedish real estate company Vasakronan was the first company in the world to issue a green bond, in 2013 (Interviews 13-SE and 16-SE). In 2024, 16% of the overall corporate issuance in Sweden was categorised as green, with 140 individual firms seeking this type of financing – for the most part real-economy corporations (Karltorp and Maltais, 2024). The Netherlands is also considered a sustainable finance leader, not least due to the active role that Dutch experts and public officials play in shaping the broader ecosystem of sustainable finance within the EU (Siderius, 2023). However, the first Dutch corporate green bond was not issued until 2016, and it was by a bank (NWB) rather than a real-economy corporation. Since then, financial companies have been particularly active in the sustainable finance market segment, with the overall number of issuers remaining relatively low. In Spain, the energy company Iberdola issued green bonds in 2014, which was followed by a moderate trend of banks, energy companies and municipal governments doing so. However, whereas companies in all countries list their bond issuances on exchanges abroad (especially in Dublin or Luxembourg), this trend is particularly visible among Spanish non-financial companies. The green bond segment is smallest in Poland, despite the Polish government having been the first to issue a sovereign green bond, in 2016 (Smoleńska and Lewandowski, 2023). The first corporate green bond was issued in Poland in 2019, by the largely state-owned bank PKO; the pool of issuers remains small, however is relatively diversified among non-financial corporates (energy, real estate, media companies). Notwithstanding the differences in the state of green bond markets, across the four jurisdictions the EU sustainable finance trend intersects with market trends, whether on the corporate (Netherlands, Sweden and Spain) or government side (Poland).
Table 1: Green bond market development in case study jurisdictions
First corporate green bond issuer, sector (year) Total no. of issuers Types of issuers Average issues per issuer Green issuance as a per cent of overall corporate issuance Green bond issuers in the sample
Netherlands NWB, bank (2016) 39 Finance companies (over 60%), corporations 6 11% 8
Poland PKO Bank Hipoteczny (2019) 16 Corporations, banks 2 4% 6
Spain Iberdola, energy (2014) 50 Corporations, banks, local governments 5 8% 8
Sweden Vasakronan, real estate (2013) 140 Corporations (over 60%), local governments, finance companies 6 16% 9
Source: EEA (2022); Bloomberg (2024); See also Supplementary material 1
Market adaptations – exchange of information, monitoring and sanctions in green bond prospectuses
Overall, the analysed bond prospectuses have a set of common features as regards the ‘green’ commitments of the issuer. EU law requirements under the Prospectus Regulation results in a similar overall structure of these documents (Veil, 2024), including disclosures about the risks of investing in the bond, information about the issuer and the specific terms of the issuance. Furthermore, all the issuances relied on the global green bond standard (Green Bond Principles of the International Capital Market’s Association), which requires issuers to define the use of proceeds in the GBF, and externally verify the latter (Ramos Muñoz and Smoleńska, 2023). Across the prospectuses, information related to green commitments is covered predominantly in three sections: risk disclosures, template term sheets and separate sections dedicated to ‘use of proceeds’ commitments. However, how such information is presented, in what detail and how the green commitments are integrated into the contractually binding terms of issuance vary substantially from country to country, as well as across sectors and over time.
How issuers integrate the sustainability commitments into the bond prospectuses is by no means consistent. In terms of integrating the green bond into the binding elements of the bond issue, the prospectuses most commonly mention that the ‘green bond’ use of proceeds is the ‘reason for issue’, or they include reference to a ‘use of proceeds’ section clarifying that the proceeds (or an equal amount) will be used to finance green projects in the disclosed bond terms, as part of non-binding features of the bonds. The level of commitment varies: generally, issuers ‘will’ use the proceeds to finance eligible green projects, although several issuers use lighter language – having such an ‘intention’ (Swedish Volvo, 2024 ) – or they allow for the fungibility of funds (e.g. Swedish Fabege, 2024). Only in five Polish bond issues is the green use of proceeds identified as a legally binding ‘purpose of issue’. In one case this is further supplemented with a Supervisory Board resolution that further shores up the commitment (Ghelamco, 2023).
As regards the level of detail in the green commitments, generally across the issuances the GBFs are kept explicitly legally separate (‘not incorporated’ in the prospectus document). Most bond issues instead emphasise that updates to the GBF are not considered changes to the base prospectus. Two thirds of them include a separate ‘use of proceeds’ section that summarises the key aspects of the GBF as regards the projects to be financed, governance structures and reporting, although these separate sections vary in length. The level of detail, including as regards common definitions of ‘green projects’ or green bond principles varies, is notably low in many Swedish bond issues.
It is in the definitional aspects that EU sustainable finance policy comes to the fore, although in a scattered and inconsistent way. Particularly in countries where the issuance of green bonds predates the rise of the EU green bond agenda, the positive impact of EU sustainable finance policies geared towards providing market participants with clearer definitions is by no means obvious. In fact, many bond issues include phrasing in which the issuers emphasise that there is no common understanding of what activities are sustainable, only to follow this statement with a reference to the EU taxonomy. For example, the 2022 issuance by Iberdola states:
‘it should be noted that there is currently no clear definition (legal, regulatory or otherwise) of, nor market consensus as to what constitutes, a ‘green’ or an equivalently-labelled project, including … the so called EU Taxonomy, the operative provisions of which are due to enter into force over the course of 2022 and 2023) or as to what precise attributes are required for a particular project to be defined as ‘green’ or such other equivalent label nor can any assurance be given that such a clear definition or consensus will develop over time or that any prevailing market consensus will not significantly change.’
Similar wording is found in most of the bond issues from multinational firms (with the exception of the more local Spanish and Polish firms, which have much more shorter risk disclosure sections). Therefore, according to these issuances not only is the EU sustainable finance framework barely helpful in clarifying the meaning of ‘what is green’, but it can also in fact be a risk factor. The Swedish company Cibius in its 2024 prospectus, for example, alerted potential investors to the losses that non-compliance with EU regulations can bring about in directly financial or reputational terms, even while making tentative pledges to comply with the standard (see also Swedish bank SEB, 2023; Dutch Green Storm). The application of the EU sustainable finance framework appears easier in Poland and Spain – at least according to the information disclosed in the prospectuses. The 2023 issue from the Polish bank Pekao includes commitments to follow the Green Taxonomy classifications in selecting eligible projects to be financed, without qualification. The Spanish bank BBVA meanwhile refers to its internal efforts to follow that regulation (2024).
By comparing where information about the impact of sustainability commitments to be financed through green bond issuance is disclosed, jurisdiction-specific tensions can be identified, especially as regards the motivations of actors involved in green finance. In Swedish and Dutch prospectuses (as well as those of banks in all jurisdictions), we find more information about the green features of the bond in the ‘risk’ section than in any other part of the prospectus. The (increasingly elaborate) list of the risks associated with investing in green bonds span both external (e.g. regulatory changes or investor expectations) and internal factors (e.g. not following through with a project). Complex legal fortification protects the issuers, but also banks/dealers and SPO providers, from liability should the issuer deviate from their green commitments. The tension is evident. In one Dutch prospectus, the issuer makes a commitment that ‘proceeds will be used’ to finance green projects, while emphasising and detailing in the risk section why it cannot guarantee that (Alliander, 2024). Another Dutch issuer refers to the reasons for issuing their green bond as ‘reasons different from making profit’ (ING, 2022). Meanwhile, in most of the Polish and Spanish issuances, we see quite a different approach. The sections dealing with the risks of investing in green bonds (if they are included at all ) are much shorter. While issuers also refer to the difficulties they may encounter in executing green projects, they preface such information by providing detail on how the firms intend to mitigate such risks (e.g. Colonial, 2024) or use external verification to further shore up the credibility of the foreseen projects (e.g. Spanish Audax, 2020 and Greenalia, 2020; Polish Polenergia, 2024).
As regards the monitoring dimension of coordination, the often-overlooked core feature of green bonds is the issuer’s commitment to report on how the proceeds will be allocated. Such reporting enables the investors as well as other stakeholders to monitor the allocation of funds (Park, 2018). For traditional bonds no such requirement exists. While the monitoring aspects would be consistently covered in the green bond frameworks, these documents – as mentioned above – are not legally binding, although prospectuses increasingly include generic references to annual reporting commitments in the ‘use of proceeds’ sections that summarise the GBFs. References across the prospectuses place the monitoring onus on the interested parties (investors and stakeholders), with the more recent bond issues are more specific on the reporting content and frequency, following a broader trend of increased granularity. In several of the Polish bond issues we additionally find the incorporation of the reporting commitment as part of the ‘purpose of issue’ section, as well as a commitment to publish any updates to the GBF (Polenergia, 2024; RPower, 2022). From the perspective of broader strategic coordination, two further aspects are interesting. Firstly, the monitoring responsibility of banks/dealers and SPO providers is explicitly waived to some extent. For example, the 2024 prospectus of the Spanish company Adif Alta states: ‘Neither the Arranger nor the Dealers nor any of their respective affiliates will verify Eligible Green Projects or monitor the use of proceeds of Green Bonds and Noteholders shall have no recourse to them.’ Secondly, the issuances may also refer to being included in (or potentially excluded from) dedicated sustainable segments on exchanges where bonds can be listed. Several issuers explicitly include their intention to seek inclusion in the sustainable finance segment in the bond terms, which showcases the importance of such designation (Volvo, 2024; Triodos, 2022). That bond inclusion on sustainable finance segments might be consequential from the perspective of coordination, is only reinforced by the inclusion of targeted waivers ostensibly seeking to curb such effects in several prospectuses, e.g.:
‘in the event any such Notes are … listed, or admitted to trading on a dedicated ‘green’, ‘social’, ‘sustainable’ or other equivalently-labelled segment of a stock exchange or securities market, no representation or assurance is given by the Dealers, the Arranger or their respective affiliates that such listing or admission will be obtained or maintained for the lifetime of the Note.’ (Volvo, 2024)
Finally, as regards sanctions, most prospectuses expressly protect the issuers (and other involved parties, such as SPO providers or banks/dealers) from responsibility should the company not implement the green projects, especially emphasising that not using the proceeds as outlined in the GBF is not to be considered an event of default or to give rise to early redemption rights. The literature on the subject highlights these empty promises of green bonds. Nevertheless, the present analysis reveals two caveats. Firstly, in the case of Polish bond issues we do find references to explicit sanctions for deviating from the green use of proceeds, e.g. in the form of early redemption of the bonds (Ghelamco, 2022; Famur, 2021; RPower, 2022). Meanwhile, particularly Swedish and Dutch prospectuses emphasise market sanctions, such as the reputational and financial decrease in the bond’s value should the issuer fail to meet investor expectations as regards the bond’s green impact.
Several key insights follow from this analysis. Green bond issuances are generally a global trend with significant cross-fertilisation and common practices, driven by international standard setters (such as the ICMA) and global law firms (Pistor, 2019). In many cases the difference between national and (large) multinational issuers (especially banks) is more pronounced than cross-national differences (Callaghan, 2010). Nevertheless, from the perspective of capturing how the sustainable finance trend affects and coevolves with forms of market coordination, several jurisdictional differences can be identified that are puzzling, given the expectations about the institutional characteristics. Firstly, Sweden and the Netherlands appear to struggle more with incorporating EU sustainable finance in the legal form of green bond prospectuses, despite the trend being more prominent in those jurisdictions. Secondly, issuers in Poland and Spain are more optimistic about the alignment between green investments and profits for investors. Thirdly, in Poland the legal structuring of green bonds is visibly more stringent across all the dimensions of coordination. Fourthly, in all case study countries, the prospectuses point to an elevated importance of new actors (external providers) and meso-structures for coordination.
Green bonds and institutional complementarities
In this section, drawing on interviews in particular, I discuss how the local institutional features and complementarities are likely to have influenced the legal provisions of green bond issuance discussed above. Institutional analysis complements the legal exploration of green bond prospectuses. This perspective can identify the broader micro- and meso-adaptations triggered by the sustainable finance trend, including relevant EU policy interventions.
Firstly, several of the differences in practice between countries can be explained by reference to the broader legal framework. For example, concerns about litigation risks in the Netherlands, known for high-profile cases related to climate change mitigation, may explain the prevalence of waivers and the granularity of risk disclosures. However, when probed, interviewees representing the legal profession explained how the ambiguous references to EU frameworks would be intended to protect the issuers from risks associated with the market participants’ understanding of sustainability diverging from EU definitions (Interviews 2-NL and 4-NL). This suggests the importance of non-market forms of coordination in developing common understandings of sustainability, notwithstanding EU efforts to codify such definitions. The broader legal structure is evidently important, as evidenced by the Polish prospectuses, where the local law of obligations foresees criminal sanctions for allocating funds from a bond issue for purposes other than those specified in its terms (Interview 8-PL). However, here again, the interviewees pointed to the role of the World Bank (also via the International Finance Corporation) and the European Bank for Reconstruction and Development. With international financial institutions central to building up the demand book for bond issuance, their representatives have leverage over the terms of the bond issue (Interviews 3-PL and 12-PL). A shallower capital market strengthens the relative position of such investors, who demand that the risks related to investing in green bonds be counterweighted by credible company transition strategy. Such actors are also driven by public mandates related to ‘greening’ of the economies. In other words, contrary to the existing literature on the empty promises of green bonds, stronger promises are possible and in fact appear in markets where competition for capital seeking sustainable investments is higher and a prominent role is played by multilateral development banks.
Secondly, as regards the broader political economy context, green bonds as a form of sustainable market contracting in countries considered to be characterised by greater institutional complementarity and broader mechanisms of non-market coordination appear to indeed struggle more with integrating sustainability commitments into legal documentation. This observation is corroborated by the interviews with legal and banking professionals, who were much more sceptical as regards the inclusion of sustainability considerations in bond terms (Interviews 2-NL, 13-SE and 15-SE). From a narrow legal perspective, this finding may suggest that greenwashing is more prevalent in certain jurisdictions, especially where we observe ambitious green bond issuers such as Volvo backtracking on their transition commitments (Financial Times, 2024). Furthermore, the fact that issuers in these jurisdictions identify more risks associated with green finance may be the result of investor pressure within the context of ‘financialisation’ and increasingly ‘impatient’ capital (Torvanger et al., 2021; McCarthy et al., 2016). The importance of mutual expectations between firms and finance, however, remains high; legal expert interviewees in those jurisdictions questioned the tenability of the waivers in the prospectuses precisely because of mutual expectations between firms and finance, as well as evolving corporate governance rules on directors’ duties in the context of decarbonisation and repeated nature of financing relationships where firms repeatedly seek financing (Interviews 4-NL and 6-NL).
Finally, the role of the state in supporting sustainable financing appears more restricted in the jurisdictions under study than expected. While both the Dutch and Swedish supervisors displayed early interest in improving how the financial sector deals with climate-related risks (Siderius, 2023; van ‘t Klooster et al., 2024), the interviewees downplayed the public authorities’ role in green bond market development focusing rather on private actors, and individual bankers, in driving the trend (Interviews 5-NL and 12-SE). The interviewees from Poland and Spain pointed to EU law compliance and EU fund disbursements as key driver of green bond issuance (Interviews 8-PL, 12-PL, 9-ES, 18-ES , see also Raudla et al., this issue). The role of local authorities was considered limited beyond informational campaigns (e.g. Interviews 9-ES and 12-PL). However, as further discussed below, alternative meso-structures for coordination have emerged to offer a supporting role in coordinating behaviour, especially as regards exchange of information and mutual monitoring.
Sustainable finance and transformations of strategic coordination
The analysis of green bond issues in a broader institutional context draws attention to several micro- and meso-transformations of firm-finance interactions, which are summarised in Table 2. At the micro-level, the issuance of green bonds requires firms and financial actors (e.g. banks as investors and underwriters) to coordinate on issues related to what is a sustainable project, how its implementation will be monitored and whether there are any sanctions for deviating from commitments. Insights from lawyers and bankers involved in structuring the transactions suggest that banks increasingly take on new roles in the context of the financing transaction, as sustainability ‘advisors’ to firms (Interviews 6-NL, 12-PL and 16-SE), although the capacities across banks and other relevant professional services vary widely (Interview 9-ES), with a particularly prominent role of cross-border corporate groups (Interview 12-PL). This change in the behaviour of banks can be explained by both the development of new business lines (Torvanger et al., 2021; Perkins, 2020) and the changing prudential context, which increasingly incorporates transition risks as a matter of supervisory concern (Smoleńska and van ‘t Klooster, 2022). Firms align differently on common understanding of what ‘green’ projects entail: whereas in some countries we observe an emphasis on ex ante and contractual alignment on definitions (e.g. Poland; Interview 12-PL), in other cases this alignment happens outside of the formal contracting (as in the case of Sweden – see above).
New forms and roles in the interaction between firms and finance trigger changes in cross-industry coordination. New actors become an integral part of both the contractual and non-market coordination around sustainability topics: sustainability experts that provide external verification to green financing frameworks. A non-market coordination perspective on the roles of these actors puts the abundant ‘market’ waivers in perspective. While they may protect actors from legal liability, the reputational risks remain high, all the more so as one of the consistent features of the sustainable finance landscape is the emergence of sustainable finance ‘labs’, ‘observatories’ or ‘platforms’ intended to support non-market coordination between actors and to generate knowledge and insights. The Dutch Sustainable Finance Lab (SFL), established in 2012, is perhaps the best-known, and it has emerged as an academic and civil society endeavour with significant participation from financial institutions. The SFL has played an important role in convening and elevating the topic of sustainability on the banks’ and financial policymakers’ agenda (Interview 5-NL). El Observatorio Español de la Financiación Sostenible in Spain was established as a bank initiative in 2020, with a view to facilitating predominantly financial actors’ exchange on sustainable finance. In Poland, since 2022 an EU Commission-supported Platform on Sustainable Finance gathers representatives of civil society and industry as well as government officials from various relevant ministries (Interviews 8-PL and 12-PL). The Polish Platform on Sustainable Finance elevated the topic within the government, but was also an impetus for the industry to develop more fora for strategic interaction and exchange, including on key aspects such as data availability, methodological approaches and other institutional aspects (education and training) (Interview 12-PL). These complementary developments suggest that the EU sustainable finance policy project may support institutional transformation, serving as a lever to overcome ‘weak’ features of coordination mechanisms for the purpose of transition. Such findings of institutional innovation in Central and Eastern Europe to adapt to the EU integration agenda are consistent with earlier findings (Bohle, 2018).
In terms of the market-type meso-level adaptation, the green bond prospectuses draw attention to the role of sustainable finance segments on bond exchanges as a secondary market coordination mechanism. This finding suggests that sustainability transition may, in some cases, harness ‘liberal’ market coordination mechanisms. However, even here we observe local adaptations, in terms of what the inclusion of bonds in such a segment requires and how the continued meeting of requirements is monitored. While the stock exchanges in Amsterdam, Madrid, Stockholm and Warsaw all boast dedicated ESG bond market segments, only the latter two have in place explicit procedures to ‘verify’ the greenness of bond issues. Nasdaq Stockholm requires a submission of the GBF and the respective SPO, in addition to the bond-specific information, in order for a listing to be approved and has specific exclusion criteria in place. Meanwhile, in Poland, issuers that wish to add their green bonds to the dedicated Catalyst market segment of the Warsaw Stock Exchange are required to sign and disclose an additional document confirming their sustainability ambitions (Interview 8-PL).
Table 2: Market and non-market adaptations
Coordination dimension Micro-level adaptations Meso-level adaptations
Legal (contractual) adaptations Other coordination adaptations Market coordination adaptations Non-market coordination adaptations
Exchange ‘green project’ definitions;
‘use of proceeds’ commitments ‘green’ advisory roles for banks green bond frameworks;
external verification, role of sustainability advisors;
entry regulations for secondary markets dedicated industry platforms;
facilitative role of international financial institutions;
facilitative role of the state;
NGO ecosystem
Monitoring disclosure and reporting commitments integration of sustainability monitoring in ongoing client relationships voluntary reporting;
ESG rating;
secondary markets for green bonds
Sanctions early redemption exclusion of clients exclusions;
exclusion from secondary markets/indices
Can the growth-maximising political economy constellations be transformed to integrate considerations other than immediate profit, such as sustainability (Hall and Gringrich, 2009; Baccaro and Pontusson, 2016, Kupzok and Nahm, 2025)? This article shows some of the limits of such transformation arising, inter alia, due to institutional factors relating to how actors coordinate their interactions through market and non-market means. At the same time, the local adaptations show heterogeneity that translates into differentiated political economy outcomes even within the broadly similar ‘legal encasing’ of green bond issuances. The differences identified offer insights for the questions of who benefits from the EU sustainable finance political project (profiting dimension) and the struggles between interests that are revealed to be in no small degree contingent on local factors (powering dimension). As regards profiting, the advancing role of finance as a vehicle for the transition, e.g. by inducing new forms of non-market coordination, is reaffirmed both at the level of micro-interactions and through new market and non-market formats that emerge to complement this new dimension of firm-finance coordination. Such transformations could be integrated into broader discussions of a ‘green macroprudential’ regime underpinning the transition (Gabor and Braun, 2025). The differences in institutional adaptations may in particular require a calibrated monetary policy to support the differentiated status of sustainable finance, an area which requires further investigation with central banking policy remaining still a largely unexplored variable in comparative capitalisms (Jackson et al., 2024). Furthermore under specific conditions the sustainable finance agenda has tentatively been shown to have a broader impact in terms of strengthening cross-industry forms of coordination, e.g. by supporting the emergence of new forms of non-market coordination (such as dedicated platforms, see also Fontan this issue for the EU-wide context).
As regards the powering dimension, the legal encasing of green bonds is revealed as an important battleground for risk/reward trade-offs of the transition, however leading to different outcomes. Tensions, such as the one regarding the definitional disagreements continuing despite the EU Green Taxonomy entering into force, show how the EU’s sustainable finance policy as a political project encounters friction, especially in jurisdictions where market practice predates it. The review of green bond issuances reveals two ways of addressing the tension between sustainability objectives and profit within the same overall legal structure of green bond issuances. Issuers and financial institutions may emphasise the increased risks associated with investing in sustainability. Though cloaked in the language of ‘sustainability preferences’, the increased risk amounts to a financial implication: lower returns. Alternatively, the sustainability features of the bond may be made to reinforce the safety of returns narrative – with green financing being reaffirmed as part of the growth paradigm, in which sustainability performance is treated as the essential condition of financial performance. Such differences have important implications for how we think about the fit between green finance and profit-maximising capitalism. They also reveal the limits of what the EU’s sustainable finance political project can achieve across EU economies.
Sustainable finance policy interventions may, therefore, create different opportunities across the internal market. At the same time, where some jurisdictions seek to use the sustainable finance trend to jumpstart local capital markets, the tensions identified in this article are likely to lead to both intra-EU and wider tensions: if sustainable finance is truly about financing the transformation in particular regions (especially for energy production, construction and transport), the question of where capital is invested becomes an ever growing concern of policymakers (McNamara, 2023) in addition to the question of growth. These findings provide further insights into finance and financialisation processes in the EU, highlighting the emerging paradoxes (Babic, 2024; Schelkle and Bohle, 2021).
Conclusions
In this article I have investigated how the legal features of green bonds’ can provide insight into the institutional adaptations of capitalist economies in the context of the sustainability transition, and EU sustainable finance regime and political project in particular. I have shown how notwithstanding the common legal encasing of green bonds, key coordination features relating to exchange of information, monitoring and sanctioning, remain a reflection of the broader institutional context – the ‘way of doing things’ in that jurisdiction. The analysis has offered insights into the micro- and meso-level adaptations and transformations, both within particular institutional regimes and more generally. The comparative capitalisms lens has proven fruitful in guiding the analysis and identifying loci of institutional adaptation and transformation triggered and amplified by the EU’s sustainable finance agenda. However, it has also shown the limits of the varieties of capitalism approach when dealing with economic systems undergoing rapid change (Blyth, 2003; Zeitlin and Rangoni, 2023), in particular one orientated towards integrating motivations other than growth into the firm-finance relationships (Green, 2022).
What broader insights follow from these findings in terms of whether the sustainable finance policy project can shift the pathological path dependencies of capitalist institutions (Dryzek and Pickering, 2019)? Despite the grand designs of the EU sustainable finance policy project, the impact on the ground is incremental and stunted. Although specific features of sustainable finance have systematic impacts, sustainability considerations and forward-looking planning may be at odds with the firm-finance ‘way of doing things’, with concomitant tensions emerging. The law offers one avenue to strengthen the firms’ transition commitments, especially in more financially developed countries where weaker legal enforceability may make these more amenable to greenwashing practices, in particular by large and powerful firms. Meanwhile, weaker complementarity and less strategic non-market coordination seems conducive to stronger legal provisions regarding green commitments in financial instruments. However, the article problematises such differentiation as one also reflecting the fundamental tension at the heart of the EU’s sustainable finance political project, namely that of the place of profit and growth in sustainability transitions, which remains unresolved.
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The principle of mutual trust in EU Law : ensuring unity through diversity
(INP PAN, 2025) O’Neill, Ruairi; Taborowski, Maciej
This thesis seeks to examine the extent to which mutual trust operates as a structural principle of EU law, obliging national administrative and judicial authorities to presume the functional equivalence of all Member States’ legal systems and their safeguarding of fundamental rights, without questioning their adequacy. Drawing on the terminological references to ‘trust’ and ‘confidence’ as articulated by Advocate General Szpunar, the study will dissect mutual trust into two distinct yet interrelated components: the relational trust that national authorities place in the acts of their counterparts in other Member States, and the foundational confidence they have in the administrative and judicial systems from which those acts originate. By framing the EU legal order as being fundamentally rooted in mutual trust, this thesis will critically analyse the implications and consequences that arise from such a classification, exploring how this principle shapes the functioning and coherence of the EU’s legal and institutional framework.
Sędziowskie decyzje i poglądy na temat stosowania kary pozbawienia wolności
(INP PAN, 2025) Wzorek, Dominik; Klaus, Witold
Celem pracy była rekonstrukcja mechanizmu wymierzania kary pozbawienia wolności przez sędziów w Polsce oraz zdefiniowanie roli sędziów w systemie sprawiedliwości karnej. We wstępie do niniejszej pracy sformułowano pytanie badawcze: Jak w rzeczywistości przebiega sędziowski proces decyzyjny oraz w jaki sposób osobiste preferencje sędziów związane są z określonym wymiarem kary. Dodatkowo sformułowano pięć pytań szczegółowych:
(1) Jaka jest rola kary pozbawienia wolności w polskim systemie sankcji grożących za przestępstwo? Jak często ta kara jest stosowana? W jakim wymiarze? Jak często wymierzana jest kara pozbawienia wolności z warunkowym jej zawieszeniem?
(2) Jaka jest treść normatywna dyrektyw sędziowskiego wymiaru kary w Polsce? Jakie relacje zachodzą pomiędzy tymi dyrektywami? Czy istnieje dyrektywa nadrzędna?
(3) W jaki sposób polscy sędziowie uzasadniają (w pisemnych uzasadnieniach wyroków) stosowanie kary pozbawienia wolności (jej konkretnego wymiaru oraz jej warunkowego zawieszenia)?
(4) Jakie poglądy na temat źródeł przestępczości, karania oraz wymiaru kary mają sędziowie i jakie w związku z tym dyrektywy i racjonalizacje kary preferują w codziennej praktyce orzeczniczej?
(5) Jakie dolegliwości i konsekwencje zastosowania kary pozbawienia wolności sędziowie
identyfikują?