Will the EU Taxonomy Regulation Foster Sustainable Corporate Governance?

EU securities regulation has established a taxonomy of environmentally sustainable activities. This article discusses, from a law and economics standpoint, the potential of this taxonomy to support sustainable corporate governance. Corporate governance can be an efficient way to channel investor pre...

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Autor principal:	Alessio M. Pacces
Formato:	article
Lenguaje:	EN
Publicado:	MDPI AG 2021
Materias:	environmental sustainability law and economics securities regulation corporate governance institutional investors greenwashing Environmental effects of industries and plants TD194-195 Renewable energy sources TJ807-830 Environmental sciences GE1-350
Acceso en línea:	https://doaj.org/article/e5a78aa04d6340f794da60a920bf93d5
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spelling	oai:doaj.org-article:e5a78aa04d6340f794da60a920bf93d52021-11-11T19:51:20ZWill the EU Taxonomy Regulation Foster Sustainable Corporate Governance?10.3390/su1321123162071-1050https://doaj.org/article/e5a78aa04d6340f794da60a920bf93d52021-11-01T00:00:00Zhttps://www.mdpi.com/2071-1050/13/21/12316https://doaj.org/toc/2071-1050EU securities regulation has established a taxonomy of environmentally sustainable activities. This article discusses, from a law and economics standpoint, the potential of this taxonomy to support sustainable corporate governance. Corporate governance can be an efficient way to channel investor preferences towards sustainability because the concentration of institutional shareholding has lowered the transaction costs of shareholder action. However, there is a principal-agent problem between institutional investors and their beneficiaries, which depends on greenwashing and undermines sustainable corporate governance. This article argues that introducing environmental sustainability into EU mandatory disclosure aligns the institutional investors’ incentives with the interest of their beneficiaries and may foster the efficient inclusion of sustainability in corporate governance. The argument is threefold. Firstly, the EU Taxonomy may curb greenwashing by standardizing the disclosure of environmental sustainability. Secondly, this information may become salient for the beneficiaries as the same standards define the sustainability preferences to be considered in recommending and marketing financial products. Thirdly, sustainability disclosure prompts institutional investors to compete for sustainability-minded beneficiaries. Being unable to avoid unsustainable companies altogether, institutional investors are expected to cater to beneficiaries’ preferences for environmental sustainability using voice instead of exit.Alessio M. PaccesMDPI AGarticleenvironmental sustainabilitylaw and economicssecurities regulationcorporate governanceinstitutional investorsgreenwashingEnvironmental effects of industries and plantsTD194-195Renewable energy sourcesTJ807-830Environmental sciencesGE1-350ENSustainability, Vol 13, Iss 12316, p 12316 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	environmental sustainability law and economics securities regulation corporate governance institutional investors greenwashing Environmental effects of industries and plants TD194-195 Renewable energy sources TJ807-830 Environmental sciences GE1-350
spellingShingle	environmental sustainability law and economics securities regulation corporate governance institutional investors greenwashing Environmental effects of industries and plants TD194-195 Renewable energy sources TJ807-830 Environmental sciences GE1-350 Alessio M. Pacces Will the EU Taxonomy Regulation Foster Sustainable Corporate Governance?
description	EU securities regulation has established a taxonomy of environmentally sustainable activities. This article discusses, from a law and economics standpoint, the potential of this taxonomy to support sustainable corporate governance. Corporate governance can be an efficient way to channel investor preferences towards sustainability because the concentration of institutional shareholding has lowered the transaction costs of shareholder action. However, there is a principal-agent problem between institutional investors and their beneficiaries, which depends on greenwashing and undermines sustainable corporate governance. This article argues that introducing environmental sustainability into EU mandatory disclosure aligns the institutional investors’ incentives with the interest of their beneficiaries and may foster the efficient inclusion of sustainability in corporate governance. The argument is threefold. Firstly, the EU Taxonomy may curb greenwashing by standardizing the disclosure of environmental sustainability. Secondly, this information may become salient for the beneficiaries as the same standards define the sustainability preferences to be considered in recommending and marketing financial products. Thirdly, sustainability disclosure prompts institutional investors to compete for sustainability-minded beneficiaries. Being unable to avoid unsustainable companies altogether, institutional investors are expected to cater to beneficiaries’ preferences for environmental sustainability using voice instead of exit.
format	article
author	Alessio M. Pacces
author_facet	Alessio M. Pacces
author_sort	Alessio M. Pacces
title	Will the EU Taxonomy Regulation Foster Sustainable Corporate Governance?
title_short	Will the EU Taxonomy Regulation Foster Sustainable Corporate Governance?
title_full	Will the EU Taxonomy Regulation Foster Sustainable Corporate Governance?
title_fullStr	Will the EU Taxonomy Regulation Foster Sustainable Corporate Governance?
title_full_unstemmed	Will the EU Taxonomy Regulation Foster Sustainable Corporate Governance?
title_sort	will the eu taxonomy regulation foster sustainable corporate governance?
publisher	MDPI AG
publishDate	2021
url	https://doaj.org/article/e5a78aa04d6340f794da60a920bf93d5
work_keys_str_mv	AT alessiompacces willtheeutaxonomyregulationfostersustainablecorporategovernance
_version_	1718431441786765312

Will the EU Taxonomy Regulation Foster Sustainable Corporate Governance?

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