The Politics of Sustainable Finance for Forests: Interests, beliefs and advocacy coalitions shaping forest sustainability criteria in the making of the EU Taxonomy

Abstract

The EU’s sustainable finance regulation classifying sustainable economic activities — known as “taxonomy” in short — has made headlines due to controversies about what can be considered a sustainable investment, and what not. This study investigates the evolution of advocacy coalitions and their strategies in the development of the taxonomy’s forestry criteria. It is built on an interpretive process tracing, involving 46 expert interviews conducted in 2019, 2021 and 2022, and an extensive document analysis. Our findings illustrate a complex process that is connected to a diversity of sectoral policies. This cross-sectoral nature of the policy process enables the emergence of cross-sectoral alliances, highlighting strikingly different policy beliefs and economic as well as bureaucratic/political interests connected to these. Owing to a rich set of strategies employed, and deals made at different policy levels, as well as an overall lack of transparency, the proclaimed “science-based” decision-making is de facto turned into a highly contested political minefield. Science – insofar involved – has contributed to the legitimisation of divergent beliefs rather than mediate among them. We conclude by arguing that the taxonomy’s potential to globally influence the regulation of sustainable finance as a “gold standard” is questionable because of the ambiguity resulting from the political struggle.