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Brussels The topic of sustainability may have been overshadowed by the corona crisis this year, but it has not disappeared. On the contrary: In the summer, the EU Commission for the first time defined in a generally binding manner when an investment can be described as “green” and thus sustainable.
The so-called taxonomy regulation was passed in July and sets standards worldwide. But what was implemented relatively smoothly in the first serve now leads to heated follow-up discussions in Brussels.
The focus is on the question of whether banks should be forced, as it were, through the lever of capital adequacy, to grant more “green” loans in order to help push the “green deal” promised by politicians.
In practice, this would mean that loans for sustainably operating companies would have to be backed with less equity than loans that do not meet these criteria. To a certain extent, there is a “green” factor that makes such financing cheaper or even more expensive for the banks.
The EU Commission wants to enforce exactly that. She sees taxonomy as a reliable decision-making aid for the financial market. “It will be instrumental in channeling investment into green and sustainable projects,” said Mairead McGuinness, Commissioner for Financial Services, Financial Stability and Capital Markets Union.
The rest of the schedule is tight. As part of the Taxonomy Regulation, the Commission was asked to present technical screening criteria through “delegated acts” in order to further develop the taxonomy.
The first two sets of criteria have already been published in a draft delegated act which is now open for feedback. The delegated act will then be subject to scrutiny by the European Parliament and the Council and will apply from January 2022.
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As far as regulation for the banks is concerned, the critics are already forming. The MEP and CSU Deputy Chief Angelika Niebler told the Handelsblatt in Brussels: “If we start to intervene in the risk assessment of the banks, we risk a crisis like the bursting of the real estate bubble. That worries me a lot. “
The former Vice President of the Bundesbank, Franz-Christoph Zeitler, demands: “It should be made legally or politically binding that an application of the taxonomy to lending and thus a direct impact on SMEs is excluded.” He fears a “planned economy control of Economy”.
The banks have not yet fully agreed with this tenor. The fact that certain “green” loans could also become cheaper for the financial institutions is even met with approval. After all, regulators are already turning many other screws and putting the industry under pressure: “We are clearly in favor of lowering equity requirements across the board for financing sustainable investments and consumption,” explains Torsten Jäger, Head of Sustainability at the BdB private banking association in Germany. “Not because sustainable financing is inherently low-risk. But because it needs a strong political signal to quickly direct more capital into the sustainable restructuring of the economy. “
However, the BdB also restricts the fact that the taxonomy can only be an orientation framework for what sustainable economic activities are. “From our point of view, it is not easy to apply it to a bank’s loan book.”
The EU Commission’s regulation has not yet been implemented. Discussions on the classification of the various industries are still ongoing. Only last Friday did the Commission start a public hearing to sharpen the criteria. The aim is to prevent possible greenwashing – that is, wrongly assigned “green” ratings.
The background to this is the booming market for sustainable investments, especially in Europe. The Taxonomy Ordinance has an appendix of over 600 pages. It regulates the industries from energy production to agriculture, from steel production to plastics production, from transport to construction. The financial sector also appears as an industry. The banks themselves sell sustainable investment products and green corporate bonds.
Warning against repetition of fiscal policy mistakes
With a view to a possible reign of politics in the banks and lending, Zeitler warns against repeating financial policy mistakes. In the years leading up to the 2007 financial crisis, the US attempted to influence risk assessment through well-intentioned political measures, namely through a guaranteed purchase of home loans by state-sponsored institutions regardless of their risk and then “packaging” these loans in structured securities.
The result was a large real estate bubble in the USA, which burst from 2007 with huge financial and social consequences. “In the same way, building a“ green financial bubble ”would not serve anyone today,” warns Zeitler.
Critics like Niebler and Zeitler demand more transparency when developing the detailed catalog of criteria. The responsible “platform for sustainable finance” should be taken out of the “democratic darkroom”, they demand.
“Fundamental decisions, for example whether the financing of natural gas projects or certain means of transport and building materials should be made significantly more expensive, must not be made solely by a committee and a delegated legal act of the Commission,” says European politician Niebler and demands: “Political decisions on Implementation of the taxonomy regulation must be discussed and decided in parliament. “
In addition, more representatives from business should be represented on the committee. So far representatives of civil society from the environmental sector and experts are overrepresented.
Last but not least, Niebler advocates an assessment on a global level. “On the international financial markets, proposals on taxonomy ultimately only make economic sense if they are followed up within the framework of the OECD.”
More: Bundesbank President warns of “green” monetary policy,
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