THE ROLE OF THE BANKING SECTOR IN FINANCING THE CIRCULAR ECONOMY: MODELS, METRICS, AND RISKS IN THE ERA OF THE EUROPEAN TAXONOMY. Investigating the Impact of the EU Taxonomy on Financial Markets

This work opens with a critical review of the incompatibility between the linear economic model—based on extraction, production, consumption, and disposal—and the biophysical limits of the planet. Drawing on ecological economics and bioeconomy, the thesis adopts the principles of economic metabolism to define sustainability as a systemic reorganization of the relationship between economy and nature. Within this perspective, the circular economy is not merely a set of sectoral practices, but an alternative paradigm aimed not only at closing material loops, but more importantly at regenerating ecosystems and reducing entropy in economic systems. Finance is called upon to play an active role in this transformation by becoming genuinely "sustainable." However, current risk models remain traditional, tending to penalize sustainable enterprises due to delayed returns, intangible assets, and non-standard business models. At the same time, ESG metrics—widely adopted to measure sustainability—suffer from methodological inconsistency, lack of transparency, and limited predictive capacity in the context of credit risk assessment. The EU Taxonomy was introduced to address this tension, providing a technical and regulatory framework to realign financial flows with scientifically defined environmental objectives. Nonetheless, a significant gap persists between declared commitments and operational coherence in evaluation and allocation processes. Based on these premises, the thesis investigates how the banking system can contribute to the transition toward a circular and sustainable economy, focusing on models, metrics, and risks within the framework of the EU Taxonomy. It is structured into three main studies: Chapter I – “Financing the Circular Economy: How Suitable Is the Traditional Banking Business Model?” Chapter II – “From Metabolism to Metrics: Measuring Environmental Sustainability and Credit Allocation Through Allometric Scaling” Chapter III – “Sustainability, Circular Economy, and Bank Credit Quality: Evidence from the European Union” Through an interdisciplinary and multi-level approach (micro, meso, and macro), the thesis offers an integrated analytical framework for evaluating how banks can measure, assess, and finance the circular transition. The work concludes by presenting, in addition to the main findings, the challenges encountered during the three years of research—driven by profound social, regulatory, and geopolitical changes—which required continuous adaptation of objectives and analyses, and underscored the non-linearity of the research process itself.