The EU Taxonomy: Gold Standard or Institutionalised Greenwashing?

The transition towards a sustainable, low-carbon and resource-efficient global economy will require huge amounts of investments, and private finance is increasingly singled out as the solution. But in contrast to the increased reliance on finance to solve the climate crisis stands a number of deep-seated challenges in the so-called ‘sustainable finance’ system, where short-term investment horizons and poor sustainability reporting continue to prevent the effective allocation of private assets to green projects. In response, the EU Taxonomy was adopted on 18 June 2020 as the world’s first official system to define and classify a list of green investments. By creating a common reporting language for companies, investors and consumers, the tool is designed to increase transparency, protect against greenwashing, and steer capital to sustainable activities. The so-called ‘gold standard’ for sustainable investments has been given key role in improving practices on the continent and is already influencing the development of similar standards around the world. This highlights that, what Europe decides to label as ‘green’ has consequences way beyond its borders and can establish long-lasting path dependencies in the global governance of finance and sustainability. In this thesis, I explore the Taxonomy’s potential for changing norms for sustainable finance. With climate change governance as point of departure, I assess the strengths and weaknesses of the Taxonomy against five normative institutional strategies. I pay particular attention to how the tool’s normative standing was affected by the Complementary Climate Delegated Act (CDA), which defined gas and nuclear power as ‘green’ under the Taxonomy framework. The case study is explored through qualitative methods, by means of document analysis and 13 interviews with expert representatives from key stakeholder groups to the Taxonomy. I argue that, by establishing a common language and reporting methodology, the Taxonomy held initial promise in terms of promoting discursive shifts, defining and promoting norm-related identities, mobilising pride and shame, mobilising transnational networks and shifting forums. Its status as the ‘gold standard’ was severely hampered by the CDA however, which triggered powerful acts of de-legitimation by key stakeholders against what has been termed the single biggest act of greenwashing in history. The Act left the normative potential of the Taxonomy severely reduced, limiting its normative potential to the promotion of ‘weak’ rather than a ‘strong’ form of sustainability and alienated climate scientists and civil society along the way. Its primary road to influence now depends on its ability to ratchet up climate ambition and win back legitimacy over time, whereby a norm for truly sustainable investing might gain ground.