Enabling Sustainable Corporations? Conflating Extraction with Contribution in Conceptualizations of Sustainable Investments in the European Union

The European Union’s (EU) sustainable finance framework places private capital and financial markets at the core of the sustainable transition of public corporations and their activities in the real economy. The sustainable finance framework is a market-based solution to the EU’s dual observation that (1) an investment gap is encumbering the sustainable transition of the real economy, necessitating the mobilization of private finance, and (2) environmental degradation and climate change are the result of market failures, and this calls for harmonized definitions of sustainable investment. This paper examines the EU’s conceptualization of sustainable investment. The paper argues that this conceptualization conflates capital ownership and the allocation of real investments in primary markets with meta-investments in secondary financial markets; it also misrecognizes the corporation as a separate legal entity. Methodologically and conceptually, the EU cannot distinguish financial capital extraction following meta-investments in secondary markets from capital contributions to real corporate investments in primary markets. In the context of sustainable finance, the performative consequence of this conflation is that the EU classifies both types of investment as making contributions of equal value to sustainable change in the real economy. This conflation risks compromising EU sustainability objectives and calls for a recognition of the dichotomy between real and meta-investments in broader discussions on financing the sustainable transition. The dichotomy of real and meta-investments and corporate theory is indispensable for enabling corporate transitions through finance, and their conflation risks creating an illusion of progress in finance’s contribution to sustainability.