Does the EU Taxonomy Regulation Nudge Investors? Evidence from STOXX Europe 600 Firms

Does the EU Taxonomy Regulation Nudge Investors? Evidence from STOXX Europe 600 Firms | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Does the EU Taxonomy Regulation Nudge Investors? Evidence from STOXX Europe 600 Firms Quentin ARNAUD, Sophie GIORDANO-SPRING, Pierre CHOLLET This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-7931061/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract The EU Taxonomy Regulation (TR) requires the disclosure of standardized key performance indicators (KPIs)—the share of eligible and aligned turnover, capital expenditures, and operating expenditures—with the goal of channeling capital toward sustainable activities. We conceptualize these KPIs as nudges , i.e., disclosure devices that are intended to influence investor behavior without altering incentives. By reference to STOXX Europe 600 firms during the first two reporting years (2021–2022), we examine whether taxonomy disclosures affect mutual fund ownership, in which context we distinguish between sustainable and conventional investors. Our evidence indicates that green KPIs are important for investment but that their effects diverge from the policy ambitions of democratizing access to sustainable finance. Disclosure and higher KPI levels are systematically associated with ownership, but responses vary across KPI types and investor groups. High-level eligible revenues are correlated with low-level conventional fund ownership, whereas high-level alignment ratios attract greater ownership by funds that are committed to sustainability. Moreover, sustainable funds penalize firms that combine high-level eligible revenues with poor carbon performance, which is consistent with screening behavior. Among the three indicators considered in this context, turnover alignment is identified as the most interpretable and effective signal. We contribute to three streams of literature. First, we extend the research on mandatory sustainability reporting by documenting the capital market effects of a novel disclosure regime. Second, we enrich the literature on investors’ use of environmental, social, and governance (ESG) information by distinguishing between eligibility and alignment KPIs and by revealing how investor types interpret these signals differently. Third, we connect sustainability accounting with behavioral economics by assessing whether TR disclosures function as nudges. Overall, although taxonomy KPIs can enhance transparency and guide sophisticated sustainable investors, they reinforce segmentation within the asset management industry rather than broadening participation in sustainable finance. Full Text Additional Declarations No competing interests reported. Supplementary Files Robustnesstests.docx Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-7931061","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":543565842,"identity":"ec81edaf-4f0d-49c3-a82a-e43a47adb312","order_by":0,"name":"Quentin ARNAUD","email":"data:image/png;base64,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","orcid":"","institution":"Toulouse 1 Capitole University","correspondingAuthor":true,"prefix":"","firstName":"Quentin","middleName":"","lastName":"ARNAUD","suffix":""},{"id":543565843,"identity":"f76f739b-49be-4319-a5c2-493999298dd8","order_by":1,"name":"Sophie GIORDANO-SPRING","email":"","orcid":"","institution":"University of Montpellier","correspondingAuthor":false,"prefix":"","firstName":"Sophie","middleName":"","lastName":"GIORDANO-SPRING","suffix":""},{"id":543565844,"identity":"d58c94a6-8d56-4d22-8993-83ba9ad52f77","order_by":2,"name":"Pierre CHOLLET","email":"","orcid":"","institution":"University of Montpellier","correspondingAuthor":false,"prefix":"","firstName":"Pierre","middleName":"","lastName":"CHOLLET","suffix":""}],"badges":[],"createdAt":"2025-10-23 10:08:11","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-7931061/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-7931061/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":96411347,"identity":"f0eb57f6-8730-4425-b8a4-519e97b7b62e","added_by":"auto","created_at":"2025-11-20 18:51:15","extension":"docx","order_by":0,"title":"","display":"","copyAsset":false,"role":"acdc-reference","size":227589,"visible":true,"origin":"","legend":"","description":"","filename":"DoestheEUTaxonomyRegulationNudgeInvestors.docx","url":"https://assets-eu.researchsquare.com/files/rs-7931061/v1/b6535ff6c34461220d52e940.docx"},{"id":96411346,"identity":"c6dd1ec4-5ac5-465f-a70b-461dd7f99ab2","added_by":"auto","created_at":"2025-11-20 18:51:15","extension":"json","order_by":1,"title":"","display":"","copyAsset":false,"role":"acdc-reference","size":6250,"visible":true,"origin":"","legend":"","description":"","filename":"686ce2cd262a47aab7e434db77c1a68b.json","url":"https://assets-eu.researchsquare.com/files/rs-7931061/v1/c54df3edc769a8614dcb9f85.json"},{"id":96454036,"identity":"9e713e6f-ca1a-41c7-91be-605af690052e","added_by":"auto","created_at":"2025-11-21 10:02:15","extension":"docx","order_by":2,"title":"","display":"","copyAsset":false,"role":"acdc-reference","size":168144,"visible":true,"origin":"","legend":"","description":"","filename":"Robustnesstests.docx","url":"https://assets-eu.researchsquare.com/files/rs-7931061/v1/89329a0e6d5bda45668f2327.docx"},{"id":96411349,"identity":"55bc1f0b-9b92-4092-bc46-a35e723cd902","added_by":"auto","created_at":"2025-11-20 18:51:15","extension":"xml","order_by":3,"title":"","display":"","copyAsset":false,"role":"acdc-reference","size":411817,"visible":true,"origin":"","legend":"","description":"","filename":"686ce2cd262a47aab7e434db77c1a68b1enriched.xml","url":"https://assets-eu.researchsquare.com/files/rs-7931061/v1/305f2923762d702b1004d88a.xml"},{"id":96411350,"identity":"b8a93893-dfd2-49de-a879-4ac69e825d8f","added_by":"auto","created_at":"2025-11-20 18:51:15","extension":"xml","order_by":4,"title":"","display":"","copyAsset":false,"role":"acdc-reference","size":414135,"visible":true,"origin":"","legend":"","description":"","filename":"686ce2cd262a47aab7e434db77c1a68b1structuring.xml","url":"https://assets-eu.researchsquare.com/files/rs-7931061/v1/ec00498f390910858115b7dd.xml"},{"id":96411351,"identity":"099f47c3-433c-47be-b746-aa2fc8f1e529","added_by":"auto","created_at":"2025-11-20 18:51:16","extension":"html","order_by":5,"title":"","display":"","copyAsset":false,"role":"acdc-reference","size":419906,"visible":true,"origin":"","legend":"","description":"","filename":"earlyproof.html","url":"https://assets-eu.researchsquare.com/files/rs-7931061/v1/d93ad352014e2ae1675c2f05.html"},{"id":98622269,"identity":"97b88bce-7397-4ba2-97d4-3f0f20feea29","added_by":"auto","created_at":"2025-12-19 16:50:38","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":693975,"visible":true,"origin":"","legend":"","description":"","filename":"DoestheEUTaxonomyRegulationNudgeInvestors.pdf","url":"https://assets-eu.researchsquare.com/files/rs-7931061/v1_covered_4097576d-2e60-4c1e-a4b7-5942c3fe864c.pdf"},{"id":96411345,"identity":"f9302d8f-bb8f-47e4-bf92-c3f5a5cd7a4d","added_by":"auto","created_at":"2025-11-20 18:51:15","extension":"docx","order_by":0,"title":"","display":"","copyAsset":false,"role":"supplement","size":168144,"visible":true,"origin":"","legend":"","description":"","filename":"Robustnesstests.docx","url":"https://assets-eu.researchsquare.com/files/rs-7931061/v1/6e8fd28cd1c5161fc9569e32.docx"}],"financialInterests":"No competing interests reported.","formattedTitle":"Does the EU Taxonomy Regulation Nudge Investors? Evidence from STOXX Europe 600 Firms","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"","lastPublishedDoi":"10.21203/rs.3.rs-7931061/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-7931061/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eThe EU Taxonomy Regulation (TR) requires the disclosure of standardized key performance indicators (KPIs)\u0026mdash;the share of eligible and aligned turnover, capital expenditures, and operating expenditures\u0026mdash;with the goal of channeling capital toward sustainable activities. We conceptualize these KPIs as \u003cem\u003enudges\u003c/em\u003e, i.e., disclosure devices that are intended to influence investor behavior without altering incentives. By reference to STOXX Europe 600 firms during the first two reporting years (2021\u0026ndash;2022), we examine whether taxonomy disclosures affect mutual fund ownership, in which context we distinguish between sustainable and conventional investors.\u003c/p\u003e\u003cp\u003eOur evidence indicates that green KPIs are important for investment but that their effects diverge from the policy ambitions of democratizing access to sustainable finance. Disclosure and higher KPI levels are systematically associated with ownership, but responses vary across KPI types and investor groups. High-level eligible revenues are correlated with low-level conventional fund ownership, whereas high-level alignment ratios attract greater ownership by funds that are committed to sustainability. Moreover, sustainable funds penalize firms that combine high-level eligible revenues with poor carbon performance, which is consistent with screening behavior. Among the three indicators considered in this context, turnover alignment is identified as the most interpretable and effective signal.\u003c/p\u003e\u003cp\u003eWe contribute to three streams of literature. First, we extend the research on mandatory sustainability reporting by documenting the capital market effects of a novel disclosure regime. Second, we enrich the literature on investors\u0026rsquo; use of environmental, social, and governance (ESG) information by distinguishing between eligibility and alignment KPIs and by revealing how investor types interpret these signals differently. Third, we connect sustainability accounting with behavioral economics by assessing whether TR disclosures function as nudges.\u003c/p\u003e\u003cp\u003eOverall, although taxonomy KPIs can enhance transparency and guide sophisticated sustainable investors, they reinforce segmentation within the asset management industry rather than broadening participation in sustainable finance.\u003c/p\u003e","manuscriptTitle":"Does the EU Taxonomy Regulation Nudge Investors? Evidence from STOXX Europe 600 Firms","msid":"","msnumber":"","nonDraftVersions":[{"code":1,"date":"2025-11-20 18:51:11","doi":"10.21203/rs.3.rs-7931061/v1","editorialEvents":[{"type":"communityComments","content":0}],"status":"published","journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true}}],"origin":"","ownerIdentity":"2f51f4d7-7154-4394-9d92-06f35d5c529d","owner":[],"postedDate":"November 20th, 2025","published":true,"recentEditorialEvents":[],"rejectedJournal":[],"revision":"","amendment":"","status":"posted","subjectAreas":[],"tags":[],"updatedAt":"2025-12-12T19:08:43+00:00","versionOfRecord":[],"versionCreatedAt":"2025-11-20 18:51:11","video":"","vorDoi":"","vorDoiUrl":"","workflowStages":[]},"version":"v1","identity":"rs-7931061","journalConfig":"researchsquare"},"__N_SSP":true},"page":"/article/[identity]/[[...version]]","query":{"redirect":"/article/rs-7931061","identity":"rs-7931061","version":["v1"]},"buildId":"8U1c8b4HqxoKbykW_rLl7","isFallback":false,"isExperimentalCompile":false,"dynamicIds":[84888],"gssp":true,"scriptLoader":[]}