It’s time to cut the Gordian Knot of regulations

Professor Kevin Haines
February 2022

I’m no Brexiteer. No way. I think Brexit was the most stupid act of (almost half of) the British public (led by crass, self-interested politicians) for, probably, hundreds of years. For me, the EU is the greatest political and social achievement of the C20th. The EU has brought peace, stability and economic prosperity to its (almost) 450 million citizens. But sometimes, just sometimes, the EU does things that really annoy me. Like any large bureaucracy, it is prone to doing stupid things and it is hard to keep it focused – but this is not an excuse and it does not stop it from really, really pissing me off.

Let’s take a recent example. The EU has just issued, albeit currently a voluntary, green bond standard ‘The European green bond standard (EUGBS)’. It states:

“Once it is adopted by co-legislators, this proposed Regulation will set a gold standard for how companies and public authorities can use green bonds to raise funds on capital markets to finance such ambitious large-scale investments, while meeting tough sustainability requirements and protecting investors.”

So where does this leave the ICMA Green Bond principles (and its entire regulator framework)? Oh well, the answer is clear – as we can see from the ‘four key requirements under the proposed framework’:

  • Taxonomy-alignment: The funds raised by the bond should be allocated fully to projects that are aligned with the EU taxonomy
  • Transparency: Full transparency on how the bond proceeds are allocated through detailed reporting requirements
  • External review: All European green bonds must be checked by an external reviewer to ensure compliance with the Regulation and taxonomy alignment of the funded projects
  • Supervision by the European Securities Markets Authority (ESMA) of reviewers: External reviewers providing services to issuers of European green bonds must be registered with and supervised by the ESMA. This will ensure the quality of their services and the reliability of their reviews to protect investors and ensure market integrity

As if this duplication (or supplantation – is that a word?) is not bad enough, ESG Today ( reports that companies are currently using 14 different frameworks to measure and report on ESG compliance, including: the Global Reporting Standards (by 33% of companies), Sustainable Accounting Standards (32%) and the soon to be compulsory Task Force on Climate Related Financial Disclosures (currently 25%).

This is sheer madness and the EU is making it worse – much worse! Enough is enough. We don’t need more of this stuff, we need less of it – a whole lot less of it. Just at face value surely the EU, like the rest of us, can see that this proliferation of standards and regulations is not just plain madness, it is massively counterproductive.

Sadly, the EU is really good at producing more and more, overlapping and supplanting standards and regulations. This is not to mention the United Nations (ooops – too late. I already did) which alongside the really good work it does has its own Sustainable Development Goals. I’m not criticising the SDGS (although they do have their limitations). They are clear and practical and many companies use then, pro-actively, in the ESG journeys. It’s just that they add to the confusion.

What is the upshot of all this confusion? Greenwashing, lack of progress, feelings of helplessness, overburden, resignation, failure to act and confusion itself.

Finding a way of acting responsibly across a range of ESG metrics and then complying with the reporting requirements of different standards and regulations is an enormous challenge for large companies. For SMEs this is almost impossible. Bedford Row Capital works with SMEs; mostly those seeking investments in the range of 50 – 250 million: so, these are not insignificant companies (amongst other SMEs which make up over 95% of the businesses in most of our European countries). The companies we work with typically have around five ‘headquarters’ staff (including CEO, CFO, COO etc). How can we possibly expect these people to get their heads around the burgeoning standards and plethora of regulations? The simple answer to this question is that we cannot. 

As a consequence we are building failure into too many SMEs and failing, also, to take the necessary steps along our, ever critical, ESG journey.

Currently, we have a growing Gordian Knot of standards and regulations. Will somebody please cut it.

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