Taxomania! Shaping Forest Policy Through Financial Regulation

Abstract

The EU’s evolving sustainable finance regulation classifying sustainable economic activities, shortly called “taxonomy”, has made headlines due to ongoing controversies about what can be considered a sustainable investment. This study investigates the evolution of advocacy coalitions and their strategies in the development of the taxonomy’s forestry criteria. It builds on process tracing involving 46 expert interviews conducted in 2019, 2021, and 2022 and an extensive document analysis. Our findings illustrate a complex process that is connected to a diversity of sectoral policies, including EU forest and nature policies, and that translates into cross-sectoral alliances, highlighting strikingly different worldviews and economic and bureaucratic/political interests connected to these. Owing to a rich set of strategies employed, and deals made at different policy levels, as well as an overall lack of transparency, the proclaimed “science-based” decision-making is significantly compromised. Our study demonstrates the influence of economic and political interests in the process that seem to undermine the main rationale to advance sustainable development through channelling private finance. The ambiguity resulting from the political struggle questions the taxonomy’s potential to influence the regulation of sustainable finance from a global perspective as a “gold standard”.

Keywords: Sustainable finance, forest finance, ESG investment, biodiversity, forest conservation, sustainable forest management