EU Taxonomy Alignment, Environmental Ratings, and Financial Performance: Evidence from STOXX Europe 600 Firms

Sammanfattning

This thesis examines how firm-reported taxonomy alignment relates to environmental ratings, firm performance, and stock returns. Using data from non-financial STOXX Europe 600 firms from financial year 2022 to 2024, we assess whether the EU Taxonomy Regulation provides information beyond established E-scores and whether alignment affects profitability and market-based outcomes. We show that taxonomy alignment is positively but only moderately associated with MSCI and LSEG E-ratings, indicating that taxonomy metrics capture distinct dimensions of environmental sustainability beyond those reflected in E-scores. We find suggestive evidence of a concave relationship between taxonomy alignment and profitability, implying that ROA and ROE are highest at moderate alignment levels. Finally, we show that highly aligned firms earn lower risk-adjusted returns than low-aligned firms. Overall, our findings suggest that the taxonomy metrics provide environmental performance information complementary to E-ratings, however, their financial implications vary in size and direction across performance metrics.