250th anniversary of the Pfandbrief: Statement of Lothar Binding on the topic of sustainable finance
These days we come across the term “sustainable” in all kinds of contexts. This is a positive development, and at the same time it is a response to negative developments that are becoming visible throughout the world and also, for quite some time now, here in Germany.
The consequences of climate change are no longer abstract: we are now witnessing them first-hand. The great inequality with regard to wealth and income adversely affects equal opportunity. Poverty poses a threat to social harmony and the health of many people. Armaments and arms exports jeopardize peace.
Sustainability means acting in a forward-looking manner. Measures carried out today guarantee that a system that functions now will function tomorrow, too. That applies to the climate, the environment and nature as much as it does to the social and economic framework. The financial system is affected in two respects. The fallout of climate change leads to economic losses and threatens financial stability. Second, investors decide who they entrust their capital to – for example, to enterprises whose production measures either conserve or squander resources.
The general conditions for a sustainable development of the financial system need to be created at the political level. With this aim, the European Commission last year drew up an action plan that is designed to help strengthen sustainable investment, thereby providing for sustainable economic growth. Amongst other things, the action plan envisages an EU label for “green financial products” or the incorporation of sustainability into the rules on the supervision of banks, the capital market and the insurance sector. The German Federal government is also working on increasing sustainability in the financial system.
With its resolution of February 25, 2019, the State Secretaries’ Committee for Sustainable Development stated that sustainable finance can help the German government achieve its sustainability-related objec-tives in areas such as climate, energy, development and financial market stability. In this context, I believe it is important – with a view to sending a clear signal to other market participants – that the special funds of the German Federal government are also invested in the capital market in a way that is compatible with the German sustainability strategy.
The appropriate financial products are a key component of sustainable finance – hence the importance of the Pfandbrief market, too. On August 29 of this year, the Pfandbrief celebrates its 250th anniversary. Throughout its history, it has proven to be a reliable refinancing instrument for its investors. This long-term orientation in itself represents an aspect of sustainability, but that alone is not enough. Pfandbriefe can be designed in such a way that they contribute solely to the financing of sustainable projects. Investment products of this kind can already be found in the market, and it would be a welcome development if the offer of sustainable Pfandbriefe were extended to address more investors with different preferences. Certainly, the progress being made in this area make me optimistic that more and more “green” and “social” Pfandbriefe will be brought to the market, and that they will make their own contribution toward a sustainable financial market.