EU eyes capital offer for banks to boost climate financing

The European Commission could reduce capital requirements for environmentally sound investment banks to boost the green economy and fight climate change, said Tuesday the vice president of the European executive.

This initiative could be part of a broader set of measures that the EU plans to introduce in March to reach the 40% carbon reduction goal of here 2030, for which it estimates about 180 billion euros of carbon investments are needed each year.

The Commission, which is responsible for proposing laws at EU level, "looks positively" at plans to reduce capital requirements for green investments of banks, said Valdis Dombrovskis at the summit "One Planet" on the financing of climate change in Paris.

"This could be done in the first place by lowering the capital requirements for some climate-friendly investments, like mortgages or energy-efficient electric cars," Dombrovskis said on the occasion of the second anniversary of the Parisian climate. agreement.

He added that reduced fees could be modeled on "existing discounts for investments in small and medium-sized enterprises or high-quality infrastructure projects".

Currently, the EU grants capital reductions of 23.81% to banks for investments of less than 1.5 million euros ($ 1.7 million) and is considering a reduction of 15 % of the share of investment above this threshold.

The magnitude of the potential capital reduction is under study and could take into account the lower risks that banks face when investing in green projects.

This decision would represent a change in the EU's strategy to boost climate finance, which has so far focused on new requirements rather than on climate change. incentives.

The Commission has proposed stricter banking supervision to promote sustainability and EU finance ministers have even discussed resistance tests of financial firms against their exposure to climate risks, such as extreme weather conditions or Volatile prices of energy.

Brussels also plans to introduce a legal requirement for asset managers to take into account environmental risks when they invest money for their clients.

The addition of a dose of carrot and stick approach to climate finance follows pressure from banks to lower capital charges on green investments. On Monday, the French banking federation FBF reiterated its call for a "green support factor".

Dombrovskis also said that in order to stimulate the market for green financial products, the commission is working on an "EU classification system for what is considered sustainable".

The common labels for green bonds could dramatically increase the investment in these instruments, which, up to now, attract much less attention than traditional products, although this is growing.

Green funds had about 145 billion euros in assets under management in 2016, compared with $ 3.1 trillion invested in European bonds and $ 3.4 trillion in equity funds, according to a report. of a group of European experts on sustainable finance.

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