In the latest sign of high-level focus in Europe on responsible finance, the European Banking Federation has made a wide-ranging set of recommendations to stimulate green finance including a common taxonomy and monetary policy measures such as accepting certain green assets as collateral for central banks loans.
In new report, Towards A Green Finance Network, the EBF, which represents 32 national banking associations, assesses the role of the banking sector around green finance focusing on the technical, legal and regulatory aspects of environmental sustainability.
Though the EBF has members from outside the European Union, including the Association of Russian Banks and the Swiss Bankers Association, the impetus for the report has been EU initiatives on green finance, most prominently the EU High-Level Expert Group on Sustainable Finance (HLEG).
And many of EBF’s recommendations reflect the interim report from HLEG such as the call for a common taxonomy around green finance and heightened disclosure on sustainability consistent with recommendations from the Bloomberg-led Taskforce on Climate-Related Financial Disclosures.
Speaking to Responsible Investor, Raymond Frenken, Head of Communications at the EBF, highlighted clearer definitions as a concern for the organisation, describing the current situation as “50 shades of green”.
The report says a reasonable level of harmonization could create a common basis for reporting and a protected EU green bond label.The report also makes detailed recommendations around changes to prudential regulations based on the risk sensitivity and evidence of the macroprudential benefits of green assets in reducing the probability of climate-related risks, for example changes to Capital Requirements Regulation to remove liquidity constraints to medium to long-term green funding.
Current situation is “50 shades of green”
Frenken says the EBF hopes the EU will take concrete action as a result of the report. Separately, the EBF has responded to the EU HLEG consultation and EBF member the Federation of Finnish Financial Services sat on the HLEG (represented by Esko Kivisaari).
The HLEG interim report has a focus on the banks, noting their role as the backbone of the EU’s financial system. However, the HLEG did come under scrutiny for its lack of banking members earlier this year.
EFR says it has now established a good dialogue with the group.
In recent months a number of major European banks have made a visible push into green and sustainable finance. UBS has committed $5bn to Sustainable Development Goals-related impact investment and BBVA that this year signed a $500m loan labelled as green.
The EBF has also been engaging with the UNEP Finance Initiative and plans to attend an event it is holding in Geneva later this month.