This dissertation investigates the impact of European Union sustainability regulations on investment companies, focusing on how Swedish firms evaluate sustainability risks and how such regulations influence their investment portfolios. Despite the increasing prominence of regulatory frameworks like the Corporate Sustainability Reporting Directive (CSRD), findings reveal significant variation in how investment companies respond. While some firms adopt a compliance-driven approach aimed at meeting legal requirements, others integrate environmental, social and governance (ESG) considerations more strategically into their decision-making processes. 

Using a qualitative, abductive approach based on semi-structured interviews, guided by two research questions about how firms assess sustainability risks within regulatory frameworks and the extent to which these regulations influence portfolios, the study reveals diverse responses. The findings show that while some firms adopt a compliance-driven approach aimed primarily at meeting legal requirements, others integrate ESG considerations more strategically, driven by long-term value creation and stakeholder expectations. The effectiveness of these regulations in promoting genuine change varies notably according to firm size, governance structures and the perceived legitimacy of the regulatory frameworks. 

The study highlights a persistent gap between regulatory intent and corporate practice, with many firms treating compliance as an endpoint rather than the start of meaningful sustainability engagement. To support deeper integration of ESG factors and promote sustainable finance within the EU, clearer incentives, greater standardisation and consistent enforcement are necessary. These insights contribute to a richer understanding of the complex role that EU sustainability regulations play in shaping investment behaviour and fostering sustainable finance.