BRUSSELS, 31 January 2018
The following is a statement by ESBG on the report released today from the High-Level Expert Group on Sustainable Finance .
The report brings to light the important role locally focused banks play in Europe's sustainable future. The group acknowledges that the savings and retail banking model will be a catalyst for sustainable investment on the ground. But there remain obstacles.
The paper includes calls from the group for more proportionality as complex banking rules hamper our lending efforts. When this principle is applied, local banks can provide more financing for green projects, especially for SMEs, households and local authorities. When proportionality is used, all banks can contribute full throttle towards a sustainable future.
SMEs are a force the paper clearly notes. Some 92% of green projects are carried out by SMEs according to one study. That means financing SMEs' green projects and the cooperation of local banks/local public authorities/SMEs, via the issuance of loans stemming from local savings, appears critical to allow the green economy to grow sustainably and to provide jobs. Savings and retail banks play a key role in financing the improvements in energy efficiency – a low-hanging fruit – both in residential and commercial buildings, as well as in equipment used by SMEs.
The report calls for expanding the Juncker Plan, especially the continued commitment in the “green sector". Boosting the plan's annual investment funding by €170 billion will help as long as the public and private work well together. If it they do, the transition to a sustainable, low-carbon economy is within reach.
The report also highlighted capital requirements as an obstacle. It is. Feedback from banking voices contained in the paper indicated that the current capital framework is not sufficient for non-complex banks. Our members see the Basel III capital floor at 72.5 per cent as being too high and will impede our model's ability to provide sustainable finance, amongst other daily activities. We welcomed the debate on this point by the group on lowering the capital requirements. Concerning the green supporting factor we support very much that the High-Level Expert Group recommends the Commission should indeed investigate whether there is a risk differential justifying use of such a factor.
When discussing sustainability, its definition must be precise. It is important to ensure that material ESG (environmental, social and governance) factors are integrated into the national definitions on sustainable finance. Definition of green and sustainable assets and potential capital reliefs are needed too. Beyond the definition, policymakers should also consider a wider range of banking products included in the EU taxonomy, especially taking on board green certificates of deposits. To conclude, savings and retail banks should be more integrated in working groups as they have the capacity to tap into their local network.