Implementation of the EU Taxonomy Could Weaken ESG Incentives Outside of Europe

The complexity of the European Union's (EU) Sustainable Finance Disclosure Regulation will make taxonomy alignment a central focus for many end-investors, and this will affect how intermediaries investThe binary nature of the taxonomy will focus investor efforts on how to improve their taxonomy alignment at the margin, which could reduce the real economy impact of engagementAs taxonomy alignment reporting is phased in, non-European investees may paradoxically benefit less in the short-run by aligning Environmental, Social, and Governance (ESG) practices with EU standards and by making national or regional efforts more important in the real economy impacts of their ESG practices

The Principles for Responsible Investment (PRI) has released an overview of some best practices aroun...