THE IMPACT OF EU TAXONOMY ON CORPORATE INVESTMENTS

The European Union Taxonomy on Sustainable Finance is the ¯rst comprehensive classi¯cation designed to identify the extent to which an economic activity is environmentally sustainable. This paper investigates how the EU Taxonomy a®ected corporate investments for Taxonomyeligible companies compared to non-eligible ones. We applied a di®erence-in-di®erence model using a dataset of 130,918 ¯rms from 27 EU Member States, using 2019 as a threshold. Our ¯ndings show that the introduction of the EU Taxonomy per se did not result in an increase in corporate investments among Taxonomy-eligible companies; rather, ¯rms' size and Taxonomyeligibility uncertainty played a key role in explaining variation in corporate investments. The implications are twofold: the participatory and communication approach of the European Commission implemented with the EU Taxonomy is e®ective in nudging corporate investments aimed at sustainability. However, this only happens when the regulation provides an unambiguous sector speci¯cation. Thus, it is important that the regulatory interventions clearly de¯ne what is sustainable.