Germany says green finance criteria not a guiding principle in EU stability mechanism

The German government has said green and sustainable finance criteria will not influence investment practices in the European Union's stability mechanism (ESM), a financial assistance institution for countries of the Eurozone. The Principles for Responsible Investment, an initiative backed by the United Nations, will not affect the ESM's investment aims, the government said in an answer to a parliamentary inquiry by the pro-business party FDP. The ESM aims to maximise liquidity, creditworthiness and yield – principles that "take precedence" over the so-called ESG (environmental, social and governance) criteria for sustainable investment included in the UN-backed initiative, the government said. However, it added that ESM investments "already have ESG-relevance" as funds are mostly invested in government bonds, and that 69 percent of the stability mechanism's assets, excluding cash deposits, heeds the ESG criteria.

Germany has pledged to greatly expand its capabilities to become "a leading location" for sustainable finance to dovetail its financial sector with international climate targets and forthcoming EU legislation on sustainable investment rules. A government-appointed Sustainable Finance Committee presented a first report in March, in which it stated that Germany "did not take on a leading role appropriate to the country’s position" within the EU to promote sustainable finance practices.