Green politicians: reconcile capital and climate

The state will and must play a central role in the ecological transformation.

But state investments alone will not be enough; we also have to activate private capital on a very large scale.

The development of the Covid-19 vaccine was like a blueprint for it: Innovative companies and their work are important to achieve social goals.

They get the money for their work primarily from the financial markets.

That is why we have to correctly set the framework for these markets.

Germany and Europe can lead the way.

The aim must be to give capital a direction - towards more sustainability.

Frequent arguments against consistent climate protection are the supposedly high costs.

But no climate protection would cost more money - either in the form of massive climate damage or in the form of delayed measures, which will be all the more expensive and drastic the longer we hesitate.

These long-term risks are a highly relevant topic for lenders and financial investors. In September, more than 200 companies from the financial sector asked the real economy to set specific CO2 emission targets. They are aware that companies are overvalued on the capital market as long as they ignore climate risks.

At this point, the financial supervision is also called upon.

The European Central Bank carried out a macroeconomic climate stress test this year.

It showed what climate-related risks can actually mean for companies: financial costs due to specific risks such as floods or forest fires.

But also significantly higher financial burdens in the future if adaptation to climate change occurs too late.

In 2022, the banks supervised by the ECB are to be subjected to such a test.

This is a good start.

EU Commission threatens to make a fatal mistake

But the national supervisory authorities must also act. So far, the Bafin has given the issue too little priority. Sustainability risks from banks and insurers were hardly monitored. In view of the corona burden on the banks, this approach may seem understandable. But a risk credit remains a risk credit. Those who finance oil and coal investments today are taking considerable risks. This must be reflected in the financing and equity base.

There is currently a lack of data for this risk measurement.

That is why sustainable projects cannot bring their cost advantages to full advantage.

In any case, mandatory transparency of climate risks in bank balance sheets would eliminate this competitive disadvantage.

Fintechs and initiatives such as the Green and Sustainable Finance Cluster Germany and the Financial Big Data Cluster are working on solutions for this.

The International Sustainability Standards Board agreed at the climate conference in Glasgow as a newly created international body for sustainability standards, with its headquarters in Frankfurt, will benefit from this expertise.

The European Union recognized early on the need to use financial markets as levers for climate protection.

Sustainable finance is a central project of the commission.

The core is the EU classification system for sustainable economic activities, the so-called taxonomy. It should make the sustainability of financial products measurable. Because the previous coexistence of different approaches hampers sustainable investments. The demand for “green” financial products is growing rapidly. The Bank for International Settlements even sees the risk of bubbles forming. The uniform classification would therefore be an important contribution to creating trust in the markets, so that it is clear that what is offered as green is also green.

Unfortunately, the EU Commission is threatening to make a fatal mistake. She wants to classify gas-fired power plants and nuclear power as sustainable. What would be understandable in the case of gas as a bridge with strict guide values ​​and a binding transformation path, in the case of nuclear power would completely counter the credibility of the classification. Europe would gamble away the opportunity as a first mover to position the European financial sector strongly in the market and to make financial markets safer and more sustainable.

The new federal government should quickly dissuade the commission from these plans and try to find a compromise for a credible sustainability classification. With the commitment to climate-neutral public investments and the expansion of green bonds, the traffic light coalition agreement contains further important agreements for a more sustainable financial market.

Hesse and Baden-Württemberg decided early on in favor of both measures and are investing their own pension funds on a sustainable basis.

A European agreement on credible, reliable European sustainability criteria would make it easier for the federal government and private investors to follow this example.

It would be an important step in moving capital in the right direction.

The newly elected Federal Chancellor and his Federal Finance Minister can rely on the support of the federal states and their financial centers in Frankfurt, Stuttgart and elsewhere.