1. Changing the Game: The EU Is Redirecting Capital Flows to Sustainable Purposes with Its EU Action Plan

The EU Sustainable Finance Action Plan (EUR-LEX 2018) on financing sustainable growth (hereinafter referred to as the Action Plan) is based on the Final Report of the High-Level Expert Group (HLEG) on Sustainable Finance set up by the EU Commission. It contains the final proposals of the expert panel, which was composed of high-level industry experts from the asset management sector and academia. The taxonomy includes a ten-point plan for transforming the economy into a sustainable one. In addition to key HLEG recommendations, it installs the introduction of climate benchmarks, accounting rules, new tasks on credit rating agencies, and the consideration of sustainability in prudential regulations for banks and insurance companies, which includes a “Green Supporting Factor” (EUR-LEX 2018). The Green Supporting Factor means that the EU incentivizes the transformation of the economy toward green production and increased investment volume for green investments (EU High-Level Expert Group on Sustainable Finance 2018 in EUR-LEX 2018). At the heart of this is a unified classification system of economic activities, called taxonomy, which aims to end the fragmentation, fraying, and fragmentation of the notion of sustainable or green investments.