The EU Taxonomy and Swedish Funds

University essay from Lunds universitet/Innovationsteknik

Abstract: A new regulation regarding sustainability is currently being implemented by the EU. The EU Taxonomy Regulation, TR, is a classification system that defines sustainable economic activities and standardizes the reporting of sustainability factors for both non-financial companies and financial market participants. The purpose of the regulation is to facilitate sustainable investments and limit the risk of greenwashing. However, since the TR is new there is a lack of research on its potential effects. This thesis investigates how the TR compares to other established systems used to evaluate the sustainability and aims to determine the impact the TR will have on Swedish funds and their sustainable investments. A qualitative study was conducted using a literature review and semi-structured interviews with Swedish funds. The results of the study were analyzed inductively through a grounded theory approach. The comparison of the TR and established systems showed that they have a lot of differences. The most significant differences are that (1) the TR is more comprehensive than the established systems, both in terms of sustainability factors included and stakeholders affected, (2) the TR is more transparent, and (3) the TR is regulatory. Furthermore, the interviews revealed that (1) Swedish funds generally believes the TR will have a positive effect on sustainable investments, (2) the TR will make sustainability more clear and easier to understand, (3) the compliance work required by the TR will demand a lot of resources, both in terms of money and time, and (4) there is a risk that the TR will benefit some sectors more than others. The author concludes that Swedish funds’ sustainable investments will increase as a result of the TR, however, so will their costs as compliance with the TR will require resources. The TR will also help standardize sustainability factors. Moreover, the TR presents some risks as it is vulnerable to lobbying and not nuanced in its judgment of sustainability.

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