European companies backing robust, science-based regulation on CO2 emissions under the EU Sustainable Finance Taxonomy are also performing better on stock markets when compared with their peers that are opposing the same policy, according to analysis of InfluenceMap's policy position scores and financial metrics from external databases. This appears to be yet another data point in the accelerating global trend of financial markets recognizing companies who are genuinely transforming their business models in line with a low carbon transition.
The EU’s Taxonomy Regulation introduces a classification system for environmentally sustainable activities, effectively a list of economic activities that are consistent with the EU's goal of achieving net-zero by 2050. Science-based thresholds for included activities, developed by a technical-expert group between July 2018 - September 2020, are currently under threat of being weakened following heavy industry push back.
This briefing sets out the emerging policy fight between the gas sector, which has been lobbying to weaken the taxonomy, and power companies with increasingly renewables-focused business models that that have supported the policy’s original stringency. This is shown to correlate with declining market capitalization in the gas sector and increasing market capitalization in the renewables-focused companies since 2019.
Despite the EU’s Sustainable Finance Taxonomy falling under the bloc's wider plans on sustainable finance, financial sector lobbyists have largely stayed silent on key elements of the policy including the electricity generation threshold. However, their investments are a powerful signal as to which side of the debate is considered the future as the EU seeks to deliver on the Paris Agreement’s agenda.