Regulatory agencies around the world must harmonize sustainable finance disclosure standards to reduce unnecessary bureaucracy and maximize capital flows towards investments that counteract climate change. That was a main message from Sabine Mauderer, a member of the board of the German Bundesbank, and Elizabeth McCaul, a member of the supervisory board of the European Central Bank, at an OMFIF sustainable finance conference in Frankfurt.
The one-day seminar on September 15, “International Standards for Sustainable Finance: Europe’s place at the forefront,” was supported by a variety of institutions, including technology consultancy Capco, Frankfurt Main Finance and the Embassy of Luxembourg in Berlin. Delegates and speakers attended from a dozen countries, including the European Commission, the United Nations, the European Investment Bank and the Organization for Economic Co-operation and Development.
Nicolas Mackel, chief executive of Luxembourg for Finance, the Grand Duchy’s financial promotion agency, summed up one of the prevailing moods at the meeting. The bitter consequences of the war in Ukraine — high inflation, recession concerns and the drawbacks of Russia’s over-reliance on energy — coincided, he said, with considerable opportunities for renewal and innovation.
Mauderer will take over in 2024 as chairman of the Network for the Greening of the Financial System, a Paris-based body of more than 100 central banks and regulators. The Bundesbank is working closely with the International Sustainability Standards Board, whose secretariat was established in Frankfurt last year.
Mauderer pointed to the confusion and inefficiency that could result from a proliferation of taxonomy schemes around the world to guide sustainable investments. And she pledged to help build a regulatory system that was diverse enough to handle the complexity of sustainable finance initiatives and the multiplicity of organizations that promote them, yet simple enough to improve transparency and enforceability.
Although the Bundesbank does not have a formal mandate for investment promotion, Mauderer stressed that Europe’s often fragmented financial landscape could lead companies to migrate to the US or Asia, where larger-scale investment opportunities are often difficult. greater.
Niall Bohan, director of asset, debt and financial risk management at the European Commission, highlighted the opportunities of the €750 billion Next Generation EU fund, which offers floating international bonds until 2026 to promote industrial renewal and green projects across the EU. European Union. .
A common theme among the 25 speakers was the need to achieve an adequate framework for public and private investors and financial institutions to channel private investment into the vast opportunities of sustainable finance.
Philipp Steinberg, director general for economic policy at the German economy and energy ministry, said he was talking to foreign private equity firms and investment organizations about opportunities in Germany. This included the government’s drive to build more renewable energy capacity, including power grids, as well as new liquefied natural gas terminals in northern Germany. Referring to comments by Franz Münterfering in the Bundestag in 2005, Steinberg said that the days when a former president of the (then and now) ruling Social Democratic party had branded foreign financial investors in Germany as ‘Heuschrecken’ (locusts) were now over. firmly in the past.
The nature of green investment reporting and requirements means that a green label on an investment is appropriate for sovereign bond issuers and large companies as they can meet the criteria. But are investors taking enough risk in green investing? A Franklin Templeton representative noted that we must invent and invest in the future and suggested that this can only happen with blended financing. Effective green investing must allow for greater risk.