German govt says push for climate neutrality is major opportunity for financial sector

The German government is urging Europe's financial sector to see the shift to a more sustainable economy as a major business opportunity. "Transforming the economy towards greater sustainability offers huge opportunities. We need to grasp them now," said finance minister Olaf Scholz at the European Sustainable Finance Summit in Frankfurt. "Banks, insurers and investors have a particular responsibility in this respect, which is why our message is: invest more in sustainability and carbon neutrality!" he added. In his opening remarks to the conference, Scholz said strong investor appetite for Germany's first green bond issued earlier this month underlined the enormous demand for green finance products.

Scholz and environment minister Svenja Schulze called on European companies to step up green investments. Just 2 percent of companies' activities by revenue meet EU taxonomy criteria for climate action and sustainability, they said in a joint press release. "Investment is needed across all sectors, from energy and transport and the circular economy to water management and agriculture, and will have to be implemented on a global scale," Schulze said. "However, the European Sustainable Finance Survey shows that big companies still have a long way to go when it comes to achieving climate neutrality," she added.

Deutsche Bank CEO Christian Sewing warned that banks that are not participating actively in green finance stand to lose revenue. "You need to jump on this one," he told the conference, adding that ratings for environmental, social and governance factors (ESG) would soon become as important as conventional credit ratings. Sewing stressed that "European banks have a fantastic chance" to become global sustainability leaders by financing the continent's transformation into a climate-neutral economy, yet also cautioned that the shift towards green finance would have to be gradual, as a sudden end to financing activities not deemed environmentally sustainable would gravely hurt the economy.

The European Sustainable Finance summit is hosted by Green and Sustainable Finance Cluster Germany (GSFCG), an alliance of financial institutions that aims to achieve a concerted adoption of sustainable finance principles. The vast majority of banks in Germany expect climate change and the political reactions to slow it will have a major impact on their business within the next 10 years. A survey conducted by the Association of German Banks found that 89 percent expect "palpable" or even "grave consequences" from the climate crisis, and about half already use voluntary sustainability standards to prepare their workflows for tighter regulations. But they are also eager to avoid tighter national regulations as part of Germany's drive to become the leading location for a sustainable financial system, and hope for a comprehensive EU rulebook.