If EU banks are to mobilise a greater share of loans for sustainable projects they will need a reliable policy framework, clear internal performance targets and the relevant skills. A discount on bank capital underlying such assets is neither justified nor likely effective. A comprehensive review of how climate risks are reflected in prudential regulation is nevertheless in order
How can finance help save the planet?
The author proposes a tilting approach to steer the allocation of the Eurosystem’s assets and collateral towards low-carbon sectors, which would reduce the cost of capital for these sectors relative to high-carbon sectors. Central banks have already started to look at climate-related risks in the context of financial stability. Should they also take the carbon intensity of assets into account in the context of monetary policy?
A few weeks ago, Silvia Merler discussed the rise of “ethical investing”. A related question emerging from the discussion is whether central banks should also “go green”. Silvia reviews the latest developments and opinions on this topic.
In this episode of the Backstage series, Bruegel's Non-Resident Fellow Dirk Schoenmaker welcomes Molly Scott Cato, a Green party MEP for South West England, for a conversation on the EU's plan to transition towards sustainable finance.
Simone Tagliapietra and Georg Zachmann write on the climate governance lesson European governments should learn from the "gilets jaunes" experience.
Sustainable investment is gaining momentum in Europe, but its current proposed taxonomy might hinder innovation in the field. In this Policy Contribution, Dirk Schoenmaker advocates for an active investment approach with concentrated portfolios, and sets out a six-point plan for sustainable investing.
Which steps are needed to really change current practices and speed up sustainable finance?
We are used to think about the value of investment as measured by financial return. But investing with an eye to environmental or social issues and, more generally, ethical considerations, has become more prominent. We review contributions to this debate.
Poland’s issue of a green bond earlier this month was the country’s second financing of this type, and the first ever repeat issue by a sovereign. It has revived the debate as to whether there should be a single regulatory standard to certify the environmental quality of financial assets. This will be a key issue for the EU’s sustainable finance strategy which is due to be released shortly.
Climate change is a relevant risk factor for the banking sector, but the European Commission's plan to lower capital requirements for greener investments is irresponsible in encouraging banks to forego proper risk management.
What is the role of sustainable finance in reaching the Paris Climate goals? What are the specific proposals towards this goal and which are the challenges facing the implementation of green finance?