Revenue alignment with the EU taxonomy regulation in developed markets

Alexander Bassen, Othar Kordsachia, Kerstin Lopatta and Weiqiang Tan

Journal of Banking & Finance, 2025, vol. 170, issue C

Abstract: 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.

Keywords: Corporate Social Responsibility; EU Taxonomy Regulation; Green Assets; Stock Returns (search for similar items in EconPapers)
JEL-codes: G12 L25 Q55 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:170:y:2025:i:c:s037842662400253x

DOI: 10.1016/j.jbankfin.2024.107339

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