Datafication of Sustainable Finance

Abstract

In the wake of the Paris Agreement of 2016, the EU Sustainable Finance Action Plan of 2018 and the EU Green Deal of 2019, the ongoing implementation of the EU's Sustainable Finance Strategy has led to a significant development of EU law with a view to financing and facilitating the transition of the real economy towards sustainability. We argue first that this strategy, at its core, is a data strategy, requiring the datafication of the entire European financial, production and services sector. By taking into account sustainability data, the ongoing process of datafication prompted by digitalization of finance will extend to data concerning externalities previously not incorporated into quantitative financial models and analysis. Second, we look at other datafication processes in finance to identify regulatory lessons for the EU's sustainable finance framework. On that basis we present policy recommendations with a view to furthering datafication of sustainable finance by way of financial regulation. In particular, we recommend the implementation of digital reporting standards developed in tandem by industry and regulators, the utilization of Green RegTech and SupTech, centralized and enabled via digital reporting infrastructure such as the European Single Access Point, and the facilitation of the use of official estimates to ensure proportionality.

Keywords: Sustainable Finance, Datafication, Financial Regulation, Taxonomy, CSRD, SFDR, Sustainability, ESG, FinTech, RegTech, SupTech, Digitalization