The European Banking Federation has responded to the interim report of the European Commission’s High Level Expert Group (HLEG) on Sustainable Finance.
From the perspective of the EBF, the main points to address are:
- A common taxonomy, set of minimum standards and disclosure framework are essential for efficient allocation of financial resources to green assets, market and risk analysis, development of comparable products and benchmarks. The EC should build on the work of the TCFD and the UNEP FI pilot project, ensuring appropriateness to the EU environment.
- Long-term finance is constrained by regulatory requirements, challenges to perform risk assessment on the long-term horizon, or demand for higher risk and liquidity premiums, making the projects less viable from economic and finance perspectives. Some constraints can be addressed by regulatory or policy decisions and clarity and certainty of the regulatory environment and public policies.
- Incentivizing (e.g. via tax, warranties, liquidity schemes) the lending to green projects, providing assistance as well as risk sharing by the public sector would act as catalyst to environmental policies, given the role banks can play as transmitters of political economic impulses. Also, building a common EU scheme for sustainable public-private partnership, incentivizing the cooperation between public and financial institutions could help to speed the transition.
- Any change in prudential regulation which could have unintended consequences (stability of the financial system; lending to small and medium-sized businesses that cannot access EU’s underdeveloped capital markets etc.) should be carefully considered.
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