Revenue Alignment with the EU Taxonomy Regulation

54 Pages Posted: 31 Jul 2022 Last revised: 13 Feb 2024

See all articles by Alexander Bassen

Alexander Bassen

University of Hamburg; University of Reading - ICMA Centre

Othar Kordsachia

University of Liechtenstein

Kerstin Lopatta

University of Hamburg - Faculty of Business, Economics, and Social Sciences

Weiqiang Tan

Education University of Hong Kong; The Education University of Hong Kong

Date Written: July 10, 2022

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 TR alignment premium, suggesting that investors already apply the TR and allocate capital to TR-aligned companies. This premium increased synchronously with an increase in investor attention to the TR after the initial publication of technical screening criteria, which specify quantitative thresholds for TR-alignment of companies’ economy activities. We also find significant cross-sectional variation in abnormal stock returns surrounding the publication date of the TR conditional on the degree of TR-alignment. Traditional ESG ratings cannot explain the TR-premium.

Keywords: Corporate Social Responsibility, EU Taxonomy Regulation, Green Assets, Stock Returns

JEL Classification: G12, L25, Q55

Suggested Citation

Bassen, Alexander and Kordsachia, Othar and Lopatta, Kerstin and Tan, Weiqiang and Tan, Weiqiang, Revenue Alignment with the EU Taxonomy Regulation (July 10, 2022). Available at SSRN: https://ssrn.com/abstract=4100617 or http://dx.doi.org/10.2139/ssrn.4100617

Alexander Bassen

University of Hamburg ( email )

Von-Melle-Park 5
20146 Hamburg
Germany

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Othar Kordsachia (Contact Author)

University of Liechtenstein ( email )

Fuerst Franz Josef-Strasse
Vaduz, 9490
Liechtenstein

Kerstin Lopatta

University of Hamburg - Faculty of Business, Economics, and Social Sciences ( email )

Von-Melle-Park 9
Hamburg, 20146
Germany

Weiqiang Tan

The Education University of Hong Kong ( email )

Tai Po
Hong Kong
Hong Kong

Education University of Hong Kong ( email )

Dept of Social Sciences
Education University of Hong Kong
Tai Po, NT 11111
Hong Kong

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