Sustainable Finance (cepInput)
As part of its Green Deal, the EU wants to oblige the financial sector to make its contribution to reducing greenhouse gas emissions. Therefore, the Commission presented an action plan this summer. The goal: the financial sector should become more sustainable.
The Centrum für Europäische Politik (cep) has examined the EU's package of measures. "Many of the initiatives planned are questionable," warns cep economist Philipp Eckhardt, who wrote the study.
According to the study, the Commission wants to introduce numerous new labels for sustainable financial products in the near future in order to increase transparency and prevent so-called greenwashing. Eckhardt rejects this. "This would inevitably displace labels from the private sector. Competition for the best labels, preferred by investors, would be prevented. The EU should only legislate if private labels raise supervisory or regulatory concerns," stresses the cep expert.
Moreover, as part of the revision of the EU regulatory framework for banks and insurance companies, the Commission has instructed the EU financial supervisory authorities to examine whether a discount in capital requirements is justified in future for sustainable investments. Eckhardt believes this to be risky. The cep economist warns: "Whether sustainable investments are actually less risky than non-sustainable ones is an open question. A softening of the risk-based regulatory approach should be avoided. Otherwise, there are risks for financial market stability."
Meanwhile, the Commission is about to determine whether it considers nuclear power and natural gas sustainable. A pro-nuclear and pro-natural gas tendency is already emerging. "There will be actors who will see the result as disregarding their sustainability preferences and will thus have little confidence in the taxonomy. The fact is: There is no need for a definition of sustainability as established by the green taxonomy," Eckhardt emphasises. There is no objective or uniform understanding of sustainability. "It is perfectly legitimate to classify sustainable activities on the basis of different criteria and to weight them differently in the case of conflicts between different environmental goals," says the cep expert.