Position on sustainable finance

Here you will find a short and concise summary of vdp’s current position on the topic of sustainable finance. Turning the tide on climate change – an area in which banks play a key role – is one of the most important topics underlying vdp’s work. Further vdp positions will follow.

How firmly is sustainable finance anchored in the financial sector?

• Banks began to see sustainability or ESG as part of their business strategy years ago – long before the topic made it onto the political radar. They have contributed substantially to the positive development of ESG.
• Politicians and regulators have now recognised the relevance of this topic and taken it on board. Now they want to use the financial industry to make the real economy more sustainable.
• Financial institutions can, of course, act as catalysts here and support this transformation process; in fact, they’re already doing so. Many of them issue green mortgages subject to special conditions, while some use Green or Social Pfandbriefe as well as green bonds for refinancing.
• Our minimum standards for sustainable Pfandbriefe provide an additional boost to the market and can be used as guidance by issuers and investors.
• However, banks are far from being the only stakeholders that now need to take action. Instead of targeting the real economy directly with their guidelines, politicians are happy to take a roundabout approach via the financial industry. But we will not be able to shoulder the sustainable transformation of the economy on our own.

With regard to the Green Deal and EU Taxonomy, what does vdp think of the EU’s activities?

• At national, European and global levels, countless institutions are focusing on sustainable finance, but often they do not discuss it with each other. This uncoordinated approach at a regulatory level creates enormous challenges for banks.
• There is an urgent need to ask ourselves what level of detail we want to afford.. The best example is the EU Taxonomy, which dominates regulations on sustainability. It establishes criteria for six environmental objectives against which the achievement of these objectives is measured.
• For two of these objectives alone, the guidelines span 500 pages. Extrapolating this to six objectives would result in 1,500 pages of definitions – a scope we find to be much too big.
• The fact is that, ultimately, we need to be focusing on one question: Which practicable measures will succeed in stopping climate change? Sustainable finance will undoubtedly play an important role here, but too many overly detailed guidelines may also be counter-productive and prevent companies from using their own initiative, which is so important. It is imperative that we don’t let this happen.