It’s not easy being green : The challenges of the EU Taxonomy and an alignment with green bonds for the real estate sector in Sweden

Sammanfattning: Green bonds have been an essential financial instrument to fund sustainable projects. While green bonds fulfil a market need, they have also received critiques such as greenwashing and weak requirements. The implementation of the new classification system, the EU Taxonomy, conducted by the European Commission, is believed to be necessary to tackle the received critiques of green bonds. As investors are starting to take interest in the EU Taxonomy, increased demand is shown within the real estate sector to align their green bonds with the EU Taxonomy.  This thesis aims to understand the benefits and challenges for the real estate sector to work with green bonds, the EU Taxonomy, and their alignment. This study was conducted by interviewing 17 participants from four different actor groups active within the real estate sector in Sweden.  The results illustrate challenges, such as the EU Taxonomy being too extensive to work with, reporting challenges and the lack of knowledge in the market. The benefits were that working with a green bond framework aligned with the Taxonomy was more attractive for investors and helped secure funding. Further, the authors discuss two overarching areas of improvement with the current state of the green bond market and the EU Taxonomy: Interpretating the EU Taxonomy and Incentives Within the Market. These two areas further highlight four recommendations to mitigate the challenges identified. The thesis proposes the following recommendations:  Platform to share knowledge and increase transparency  Sector-based classification guide  Adapting to the threshold levels  Stricter (self-regulated) requirements  While it is believed that the market for green bonds and the EU Taxonomy will continue to increase drastically, this thesis argues that the challenges identified above will need to be tackled to allow the green bond market to grow sustainably.