Two sides of the same coin: Green Taxonomy alignment versus transition risk in financial portfolios

Lucia Alessi and Stefano Battiston

International Review of Financial Analysis, 2022, vol. 84, issue C

Abstract: We develop the first top-down method to estimate the greenness of financial portfolios, in terms of alignment to the EU Taxonomy for sustainable activities. We also develop a method to estimate, at the same time, the portfolio exposure to climate transition risk. We provide sector-level, standardized and transparent coefficients for both estimates, based on definitions of greenness and transition risk that are applicable across countries. We analyse the portfolios of Euro Area investors in 2022, based on the confidential Securities Holdings Statistics of the European Central Bank. We find that, overall, the greenness of Euro Area investors’ portfolios is lower than their exposure to transition risk (2.8% vs. 11.7%).

Keywords: Greenness; Climate transition risk; Climate-related financial disclosures; EU Taxonomy; Green financial flows (search for similar items in EconPapers)
JEL-codes: G2 G3 Q54 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (18)

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Working Paper: Two sides of the same coin: Green Taxonomy alignment versus transition risk in financial portfolios (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:84:y:2022:i:c:s1057521922002708

DOI: 10.1016/j.irfa.2022.102319

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