German government turns attention to state-owned banks in latest EU taxonomy assessment

The state-funded initiative considers targeting investors and other financial institutions in 2022

The German government has launched a survey assessing how EU state-owned banks measure up to the EU Taxonomy, and the ways in which they contribute to EU climate targets and the UN Sustainable Development Goals.

This is the second year running that the state-funded initiative, named the European Sustainable Finance Survey, has been conducted. The inaugural survey in 2020 focused on the sustainability practices and taxonomy-alignment of around 400 major European companies.

The survey is funded and conducted on behalf of the German Federal Environment Ministry (BMU) and is intended to gauge how the EU Taxonomy can be used to support sustainable banking operations and to compile best practices on the topic.

In a letter sent to 134 participating state-owned banks on Monday, BMU Minister Svenja Schulze said: “It is important that public banks specifically promote sustainable transformation and align their products with environmental protection. That is why it is now important to gauge where they stand in terms of sustainability.”

The survey specifically asked public financial institutions to disclose their alignment to the green taxonomy – and for those which had not conducted such an assessment, to explain the feasibility and challenges which they faced in doing so. It also aims to gauge client demand for taxonomy-eligible financial products and asks about institutional support for the EU climate targets and the SDGs.

Respondents have until the end of September to submit their responses. 

In a statement to RI, the BMU said it was possible that the ministry would target asset owners and managers, together with other financial institutions in the next iteration of the survey.

While the 2021 survey is only focused on state-owned banks, respondents to the inaugural survey last year included six large commercial banks: Banco Santander, BNP Paribas, Commerzbank, Deutsche Bank, HSBC and Raiffeisen Bank.

According to the results of the 2020 survey, just 2% of Euro Stoxx 50-listed company activities by revenue were fully compliant with the green taxonomy. A larger 20% of activities by revenue were assessed as “taxonomy-relevant” but did not meet the full taxonomy criteria which include social safeguards and a requirement to not significantly harm any of the taxonomy’s six environmental objectives.

Currently, the only categories of the EU Taxonomy to have been fleshed out are those relating to climate change – and even they are only partially developed, with details on nuclear, gas and other sectors still in the pipeline. The criteria for the taxonomy’s remaining four environmental objectives – pollution prevention, biodiversity, circular economy and water – will be applied from 2023.