This article critically analyses the EU’s sustainable finance reforms and
argues that the interaction between its regulative and enabling aspects creates
mixed messages for governance and market-building. The Regulations adopt
an incentive-based approach towards market-building for quality sustainable finance, but lower-level products are not shut out. However, if the market responds to quality signals facilitated by regulatory reforms, the article predicts
that market-building may be concentrated in passively-managed indexed products which appeal to retail investors. This market may be dominated by large investment intermediaries who may gain an advantage precisely because of more
stringent governance imposed on them. The article further argues that retail investors can be helped by policy bridging between sustainable and digital finance, such as adjustments to the legal duty of suitability to cater for investment
advice incorporating sustainability preferences, including robo-advisory channels. The connection between digital and sustainable finance can be highly synergistic in attracting both institutional and retail demand
