An article in Financial Times today looks at easing bank capital rules to spur green investment) outlines the investor hurdles and hesitancies in green investments. From risk assessment, to capital requirements and Basel rules investors are faced what is for them less familiar ground. For the EU this is an opportunity to release tools and mechanisms to narrow the €180bn annual gap needed to remedy climate change.
In an interview, Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services and Capital Markets Union, told the FT he was “looking positively” at the European Parliament initative to lower capital requirements for banks. Objective is to find an efficient way to “direct investment into new technologies such as electric cars and mortgage loans for energy-efficient homes.” Financial Times notes, "while Europe’s banking sector has backed introduction of a “green supporting factor” to capital rules, the idea is sensitive for regulators, which use bank capital requirements to ensure financial institutions do not become overly indebted.”
At the EU, this work is carried by an expert group, and a report on sustainable finance is expected next month. Mr Dombrovskis said that the European Commission needs to “have to define rigorous criteria for what is green, to prevent banks gaming any initiatives. Investments that promote emissions reductions are a priority for this work.”