Grégoire Lunven is a PhD candidate at the Chinese University of Hong Kong. His research focuses on the intersections of climate and financial law. Under the supervision of Professors Benoît Mayer and Xi Chao, he studies the translation of international climate law into transnational financial regulation. He focuses on instruments called “sustainable finance taxonomies”, that classify economic activities according to their impacts on climate change. With his thesis, Lunven aims to find out whether financial products based on these sustainable finance taxonomies, such as green bonds, help States implement their obligations under international climate law.
Prior to starting his thesis, Lunven worked as a law teaching assistant at the University of Versailles. He also interned at the Malagasy Ministry of Environment and in a French leading law firm specializing in renewable energy. He graduated from la Sorbonne in environmental law and from Sciences Po Paris in public affairs.
Pacta sunt servanda in financial law and the climate change challenge
Many economists and climate scientists worry that the repayment of private and public debts depends on economic projects whose aggregated CO2 emissions are incompatible with States’ commitments under the Paris agreement on climate change. For instance, studies have showed the incompatibility between worldwide projected coal plants developments and the objectives of the Paris Agreement.
Provided that “Paris Agreement est servandus”, States have a collective obligation to aim at limiting climate change to 2°C and an individual obligation to respect their National Determined Contributions (NDC). For instance, the European Union committed in its revised NDC to diminish by at least 55% its CO2 emissions in 2030 compared to 1990 levels.
Such rapid transformation will prevent many economic actors from exploiting assets in which they had invested – this phenomenon is called “stranded assets”, triggering in turn the inability of these economic actors to meet their debt obligations. Doing so, they would disrespect the principle “pacta sunt servanda”.
How to preserve the “pacta sunt servanda” principle in a situation of mutual incompatibility between obligations?
This paper explores the application of green/sustainable finance taxonomies to this question. Green and sustainable finance taxonomies have been developed, in particular in the European Union and in the case of green bonds, to assess debt securities’ compatibility with environmental agreements, such as the Paris agreement. But what if these taxonomies were used to assess debt securities’ incompatibility with environmental agreements?
This paper explores the opportunities and obstacles of such a use of green finance taxonomies, especially in relation to State’s obligations under the Paris Agreement. As such, this paper provides first answers for preserving the “pacta sunt servanda” principle in face of the climate crisis.