SUSTAINABLE FINANCE

FINANCE

“The financial sector needs to throw its full weight behind the fight against climate change. This is a challenge, but also an exceptional opportunity. In the next few years, Europe’s banks and financial institutions have a chance to drive global developments in sustainable finance. By moving to an economy based around low-carbon technology and resource-efficiency, we can boost job creation, productivity, and the well-being of our people.”

Valdis DombrovskisVice-President for the Euro and Social Dialogue, Financial Stability, Financial Services and Capital Markets Union

“Making Europe’s economy more sustainable and contributing to sustainable development globally means undertaking a huge investment programme, both in the public and private sector, to improve, innovate, and become more efficient and competitive. This is an immense opportunity for us.”

Jyrki KatainenVice-President for Jobs, Growth, Investment and Competitiveness

“Moving to a greener and more sustainable economy is good for job creation, good for people, and good for the planet. Today we are making sure that the financial system works towards this goal. Our proposals will allow investors and individual citizens to make a positive choice so that their money is used more responsibly and supports sustainability.”

Frans TimmermansFirst Vice-President for Better Regulation, Interinstitutional Relations, the Rule of Law and the Charter of Fundamental Rights

European banks are at the forefront of the transition to a low-carbon economy, as well as supporting the Sustainable Development Goals. We agree that both public and private initiatives are crucial for financing the Europe of tomorrow, accelerating sustainable development and unlocking all the means that make it possible.

Banks have a clear and key role in sustainable finance, they are ready to use their knowledge for the benefit of society, and they are showing leadership at all levels.

EBF is well aware of these issues, and we have a fully-fledged Sustainable Finance Working Group the SFWG fully committed to fulfilling the role of banks in contributing to a sustainable economy and to raise awareness and promote best practices within the European banking sector.

EBF represents 32 banking associations representing 3,500 banks that finance around 80% of the economy in Europe, committed to the objectives of the Sustainable Finance Action Plan and have supported this process from the start. Through individual and collective action in international and regional fora, European banks have shown visionary leadership in tackling the urgent and paramount challenge of climate change.

To name only a few of the banking activities that are critical for transitioning to a low-carbon economy, banks:

Lend to companies;
Lend to households;
Issue bonds in their own name (which generates sources of financing for lending to companies and households);
Underwrite companies’ bonds;
Provide advice to retail & institutional investors investing through capital markets; and
Promote industry standards as Green Loan Principles.

These are in addition to other activities conducted by banks – such as asset management – which also play a key role in sustainable finance.

EU topics

Europe is estimated to have an investment gap of roughly €700 bn per year. Of this amount, the sustainability gap amounts to €180 bn Euro per year. The European Investment Bank is already bridging the gap with an average of €100 bn yearly, but it is not enough. The rest must come from the private sector.

Understanding the leading role that the EU ahas on the topic, we see the need to define a sustainability pathway up until 2050 to align long-term sustainable finance developments with political objectives. Financial and environmental policies and the relevant regulatory framework must be coordinated across government agencies and departments to ensure that financing reaches the intended goals.

European Banks are committed, and for this we support the EU efforts at all levels, as we have done with our Report (link), and participating in cooperation with our members in the work of the HLEG, and now in the work of the Technical Expert Group on Sustainable Finance that will implement the Action Plan for Financing Sustainable Growth of the European Commission.

EBF’s role is key, as we have taken very seriously the recommendations of the European Commission and for that purpose we have acted Internally: the EBF’s Sustainable Finance Working Group now has organized itself so that it can provide the European Commission with timely and relevant input on the key aspects of the action plan, notably the taxonomy, green bonds, indices and metrics, and incentives/disincentives as an extra topic of critical interest for banks.

This structure reflects the diversity of banking in Europe while benefitting from a a wide network of banks committed to drive sustainability forward and make the transition to a low carbon economy a reality sooner than later.

Finally, the issue of Energy Efficiency will be of increasing importance in the coming years, and we are committed to make it a more known and attractive product that will be known.

Towards a Green Finance Framework

EBF report “Towards a green finance framework “- September 2017

Positioning of EBF on Green Finance – focus only on the climate related dimensions of the ESG
General overview on how banks see their role in supporting sustainable growth
Current environment in which banks operate
Main obstacles for increasing banks’ involvement in financing environmentally sound investments
Suggestions to remove some of these obstacles

Key Messages

Banks are willing to engage and take their responsibilities in contributing to sustainable economy
Public private cooperation is essential, banks cannot be expected to be in driving seat
Certainty of policies and regulatory environment is key
Best practices are emerging within banking sector
Governance – accountabilities at the highest level of management
Importance of the economic viability of the projects – higher risk and liquidity premiums for long term finance
Acknowledgement of the importance to integrate ECC into credit ratings, PDs, LGDS

Towards a green finance framework – EBF Report

UN Topics

The European Banking Federation is also involved deeply in UN issues for achieving greater impact at the global level.

We are involved with the Pilot programme with 16 banks to implement the TCFD recommendations in terms of governance, risk management, strategy and metrics (announced last week).
Principles for Responsible Banking participated by 24 banks to implement the overarching principles.
Different planned events with regards to sustainability and retail.
EBF is also committed to the SDGs and we will soon announce news with regards at how we look at this issue.

Partnerships and alliances

EBF is part of Global Green Finance Council (Green Lending Principles, Green Finance Policy Directory)

We are a proud supporting partner of UNEP FI

Possibility to join OECD as a knowledge partner in 2018

Joint events by Bloomberg Philanthropies, the Institute of International Finance (IIF), the Paulson Institute, the Securities Industry and Financial Markets Association (SIFMA) UN Environment.

Envisaged cooperation with European Mortgage Federation on energy efficiency mortgage initiative.