Will green investments lead to green cities? An analysis of the potential of the new EU Taxonomy on sustainable finance for Urban Nature-Based Solutions
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The important role of cities for adaptation and mitigation to climate change is emphasized by academic research and international agreements. Future development of urban environments will define the quality of life for most human beings worldwide. An emerging practice to enhance sustainability in cities is to use the natural properties of ecosystems when planning urban spaces. Urban nature-based solutions, such as green roofs or city lagoons, have the potential to limit impacts of climate change, while also providing multiple other environmental, social, and economic benefits. Despite the numerous benefits, urban nature-based solutions struggle in securing long-term investments. The aim of this paper is to investigate the potential of the EU taxonomy on sustainable finance in tackling the challenges encountered in the financing of UNBS. The EU taxonomy is a new type of financial standard for sustainability developed in 2020. The rationale behind the taxonomy is that it will allow European investors to determine whether an economic activity is environmentally sustainable. Thus, the implementation of this new standard can be defined as a governance practice for sustainability. This research applies mixed methodologies to explore the governing modes of the EU taxonomy, the most relevant challenges for the investors, how different urban nature-based solutions are framed in the taxonomy, and the current investment patterns of different investors in European cities. On the one hand, this research highlights that the EU taxonomy holds potential for addressing several of the challenges encountered in the financing of UNBS. On the other hand, it emerges that the road to realizing this potential is still long. First, the urban dimension of sustainability needs to be further integrated into the financial standard. Second, the application of the ET to this sector depends on the actions of public stakeholders, who play a key role in UNBS financing. In the short term, the ET can provide a basis for investments in the protection of wetlands; green areas for centralized wastewater management, and external building greens (green walls, façades, and roofs), with the latter being particularly suitable for public-private partnership.