In the opinion of the EU Commission, climate change must generally be seen as a potential risk to financial market stability.

The EU authority therefore wants to align the entire European financial market regulation more closely to climate protection criteria: Those who contribute to the fight against climate change in the industry should be rewarded by the financial supervisory authority, those who act harmful to the climate should be punished.

This emerges from a draft Commission communication that Financial Markets Commissioner Mairead McGuinness will present next week.

The FAZ has received the draft.

Werner Mussler

Business correspondent in Brussels.

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    In the paper, the authority explains how it intends to take into account the general criteria of its “taxonomy” for green financial products in financial supervision.

    In addition to a modified risk assessment based on climate protection criteria, the Commission also wants to ensure that the transition to a “sustainable economy” decided by the EU does not fail due to funding bottlenecks.

    Like other policy areas, the Commission wants to subject financial market regulation to the “Green Deal” decided by the EU. For the risk assessment of financial products, therefore, climate and sustainability risks must always be taken into account, according to the paper. “Further steps” are necessary with a view to financial accounting rules, rating regulation, micro- and macro-prudential monitoring of the financial sector and the competencies of the supervisory authorities. The paper does not yet contain legislative proposals, but it does contain a fairly precise roadmap.

    For the banking sector, the Commission intends to incorporate environmental risks into the risk requirements of the revision of the Capital Adequacy Regulation and Directive (CRD / CRR), which is already planned for the second half of the year. In the future, the supervisory authorities will always have to include sustainability risks in their ongoing assessment of the institutes, according to the paper. To this end, the Commission wants to authorize the EU banking supervisory authority (EBA) to determine criteria for sustainability and to measure and monitor their risks. All European and national EU supervisory authorities would have to integrate environmental risks into their ongoing risk assessment. Last but not least, the banks should carry out internal stress tests themselves, in which they should check their "ability to adapt to the risks of climate change". The Commission wants to mandate the EMA toto issue guidelines for this.

    What is useful in the fight against climate change, on the other hand, should, according to the will of the Commission, be better dealt with in future risk assessment.

    As an example, the agency cites that investing in the energy efficiency of a mortgage-backed house could automatically increase the value of the mortgage collateral.

    The EBA should also submit proposals for this.

    Commission plans to regulate the insurance industry

    The insurance industry wants to subject the commission to a similar all-round review based on climate protection criteria. The insurance companies would also have to submit to a kind of stress test and check whether they are prepared for the "climate change scenario", it says in the paper. On the other hand, “innovative” insurance contracts that serve to protect the climate should be positively taken into account in the risk assessment of individual companies. The Commission intends to incorporate this reorientation of insurance supervision, which is to be accompanied by new competencies for the supervisory authority EIOPA, in the revision of the Solvency II insurance directive, which is also planned for the second half of the year.

    In addition to realigning the supervision of individual companies, the Commission also wants to look at long-term systemic financial market risks that could arise from climate change. The EU supervisory authorities and the European Central Bank (ECB) are to carry out stress tests on a regular basis over the long term. For example, they should check whether the loss of biodiversity is endangering financial market stability.

    A one-off stress test is also planned for the entire industry, which relates to the huge EU legislative package for climate protection (“Fit for 55”). The Commission plans to present the package in mid-July. It contains a new emissions trading scheme for traffic and houses, a CO2 offset tax and many other legislative proposals. The EU authority apparently wants to ensure that the package does not endanger financial market stability.

    The CSU MEP Markus Ferber criticized that it was "highly problematic" that the Commission wanted to "change the polarity of EU financial supervisory law" to sustainability. There is a reason that financial supervision is based on the assessment of financial market risks. The attempt to mix these with sustainability factors could be eye-catching. "If investors get the impression that risk management has to take a back seat when it comes to green financial products, the matter is done a disservice," said Ferber.