Mandatory Disclosure of Standardized Sustainability Metrics: The Case of the EU Taxonomy Regulation

53 Pages Posted: 7 Jun 2022

See all articles by Marvin Nipper

Marvin Nipper

University of Duisburg-Essen - Mercator School of Management

Andreas Ostermaier

University of Southern Denmark

Jochen Theis

University of Southern Denmark

Date Written: May 30, 2022

Abstract

Sustainability reporting enables investors to make informed decisions and is hoped to facilitate the transition to a green economy. The European Union’s taxonomy regulation enacts rules to discern sustainable activities and determine the resulting green revenue, whose disclosure is mandatory for many companies. In an experiment, we explore how this standardized metric is received by investors relative to a sustainability rating. We find that green revenue affects the investment probability more than the rating if the two metrics disagree. If they agree, a strong rating has an incremental effect on the investment probability. The effects are robust to variation in investors’ attitudes. Our findings imply that a mandatory standardized sustainability metric is an effective means of channeling investment, which complements rather than substitutes sustainability ratings.

Keywords: EU taxonomy, ESG reporting, green revenue, sustainability reporting, investor decision-making

JEL Classification: M41, M42, M48, G41, C91

Suggested Citation

Nipper, Marvin and Ostermaier, Andreas and Theis, Jochen, Mandatory Disclosure of Standardized Sustainability Metrics: The Case of the EU Taxonomy Regulation (May 30, 2022). Available at SSRN: https://ssrn.com/abstract=4123423 or http://dx.doi.org/10.2139/ssrn.4123423

Marvin Nipper

University of Duisburg-Essen - Mercator School of Management ( email )

Lotharstraße 65
Duisburg, Nordrhein-Westfalen 47057
Germany
00492033792643 (Phone)

HOME PAGE: http://www.uni-due.de/rwpc

Andreas Ostermaier (Contact Author)

University of Southern Denmark ( email )

Campusvej 55
Odense, 5230
Denmark

Jochen Theis

University of Southern Denmark

Universitetsparken 1
DK-6000 Kolding, 6000
Denmark

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