Revenue alignment with the EU taxonomy regulation in developed markets

This article provides first evidence on the capital market effects of the EU Taxonomy Regulation (TR). The TR introduced a new classification scheme to identify companies with environmentally sustainable economic activities. The results offer support for a significant estimated TR alignment premium,...

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Bibliographic Details
Published in:Journal of banking & finance 2025-01, Vol.170, p.107339, Article 107339
Main Authors: Bassen, Alexander, Kordsachia, Othar, Lopatta, Kerstin, Tan, Weiqiang
Format: Article
Language:English
Subjects:
Corporate Social Responsibility
EU Taxonomy Regulation
Green Assets
Stock Returns
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Summary:This article provides first evidence on the capital market effects of the EU Taxonomy Regulation (TR). The TR introduced a new classification scheme to identify companies with environmentally sustainable economic activities. The results offer support for a significant estimated TR alignment premium, compatible with the interpretation that investors already apply the TR and allocate capital to TR-aligned companies. This effect strengthens with an increase in investor attention. We also find significant cross-sectional variation in abnormal stock returns surrounding the publication date of the TR conditional on the degree of estimated TR alignment. Traditional ESG ratings cannot explain the TR premium.
ISSN:0378-4266
DOI:10.1016/j.jbankfin.2024.107339