The Impact of the EU Taxonomy of Sustainable Finance on the Building Field

Paper in proceeding, 2023

If the capitalist economy could be redirected to serve sustainability, it would bring hope for having a chance to mitigate the ongoing climate change. Following the Paris accord, the EU has undertaken several initiatives to regulate the private sector activities among which the EU taxonomy. The taxonomy aims at directing private finance investments by providing a classification system establishing a list of environmentally sustainable economic activities. The question this paper aims to address is what are the implications of regulation of finance and investments for companies in the building and real estate sector? Drawing on institutional theory, focusing on legitimacy, we follow the process of introducing the taxonomy within three companies – a contractor, a real estate company, and a consulting engineering company – to identify the changes the taxonomy can introduce in their business. Keeping in mind that establishing the regulation and the taxonomy is a compromise between politicians, industry lobbyists’ interventions, and technical experts’ advices, the proposed solutions may not be able to achieve the aforementioned goals. The cases were selected as possible forerunners of the impact of the taxonomy in Sweden. Two of the companies, a contractor and a real estate company, engaged recently in systematizing their measures, documenting their climate impact, and establishing strategic goals for reduction of energy and material consumption. The third, a consulting engineer company, has so far felt comfortable doing progressive statements. The extra effort of establishing documentation was carried out within 3 years during which the companies have had an unusually good economy. The analysis shows that the taxonomy is not demanding enough to provide the needed push for living up to the Paris accord and consequently risks becoming a publicly sanctioned greenwashing. The paper aims at reinforcing the development toward a sustainability of the Swedish construction sector. In doing so, it contributes to SDGs 11, 12, and 13.