Sustainable finance has rapidly risen up the agenda of banks
and asset managers as they grapple with reasonable reputational
risk. The EU has jumped into action in recent years, laying the
groundwork for its recently-announced taxonomy framework for
The framework includes: the establishment of an EU
classification system for sustainable activities, standards and
labels for green financial products, the fostering of
investment in sustainable projects, the incorporation of
sustainability when providing investment advice, and the
development of sustainability benchmarks.
Michael Doran, partner at Baker McKenzie, said it is clear
that the Commission is looking to hardwire this and create a
new, common language for the sustainable financial system.
"All market players will adopt that language and report
accordingly," he added. Clearly, while sweeping reforms that
will drastically affect how banks report on relevant issues are
in the pipeline, they are also willing to adapt.
"We are certainly working diligently to prepare ourselves
and help our customers’ transition to a low-carbon
economy," said Jeanette Fangel Løgstrup, head of group
societal impact & sustainability at Danske Bank.
"The financial sector as a whole is at the start of a
journey that will require focus and hard work to develop a more
detailed understanding of climate-related risks and
opportunities – and integrate these insights into our
Fangel Løgstrup welcomed the prospect of an EU-wide
framework. "We find it very useful for the sector as a whole to
have this as guidance and a common framework with clear
definitions of what is perceived to be green" she said. "It
will support our work of further developing offerings within
Gerald Podobnik, head of capital solutions and sustainable
financing at Deutsche Bank said that "on the whole, we are very
supportive of the whole undertaking of the EU taxonomy
framework. This is because we are bankers, not climate
scientists, thus we need someone to tell us which use of
proceeds are actually green, and we are very happy that the EU
is doing that work".
Giuseppe Zammarchi, head of sustainability and foundation at
UniCredit, views "the establishment of an EU classification
system for sustainable activities a significant step towards
the orderly transition to a low carbon and climate resilient
Zammarchi continued: "We see it as a very useful tool for
understanding how to assess what is sustainable and not."
Optimism about the EU’s taxonomy framework can
be attributed to the fact that, up until now, there had been
various interpretations of what is 'green’ from
"This made it difficult to create an efficient market and
ensure that the overall banking system is singing from the same
hymn sheet," added Podobnik.
With this in mind, he feels standardisation is "really
important", and is positive about the approach that the
taxonomy is taking, which allows players to "open up a
document, see what is defined as green, and proceed from
· European banks are implementing
forward-thinking policies on climate change, which include
divestment from contentious areas like coal;
· There is positivity about the
EU’s long-awaited EU framework;
·The framework offers formal interpretation
of sustainability activities for financial stakeholders and
reduces room for doubt or differing views.
He pointed to the bank’s sustainability
council, where members have worked on establishing an internal
taxonomy based on the EU’s draft action plan.
"This will mean we can actually define what is green and what
is sustainable in our exposure," he said. "In addition, it has
allowed us to look at which businesses we would like to grow
and which businesses we want to divest from."
As of late, Deutsche Bank has committed to no more financing
for new coal power, and has a target to reduce its thermal coal
mining portfolio by 20% by next year.
"We believe that the use of renewable energy is vital
to tackling the problem of climate change in the long term,"
said Giuseppe, pointing to UniCredit’s renewable
energy projects portfolio, which was €7.8 billion at the
end of 2018.
"Climate change is an increasingly important issue for all
businesses and the society as a whole," he said.
Zammarchi and Podobnik’s thoughts were echoed
by Outi Helenius, head of sustainability at Finnish bank Evli.
Helenius stated that she found the goal of taxonomy –
to have common language that would define sustainable
activities – as positive.
She continued that it "could also help the market to steer
the investments to the companies fostering sustainable
She was, however, cautious in her optimism. "Since
sustainability is a complex matter and not easy to define,
there are always different opinions as to what should be
included in the taxonomy and what’s not," she
said. "So it remains to be seen what will be the real impact,
and how investors will start using it in practice."
Podobnik was equally apprehensive of a full endorsement,
summarising that "the devil is always in the detail".
He continued: "What will be important in the stages of
finalisation over the next couple of months is to make sure
that it remains usable, and does not become too complex."
He stressed that players will need as much implementation help
as possible, and not just on the subject of green causes, but
also on the 'do no significant harm’ element.
"What will be important in
the stages of finalisation over the next couple of
months is to make sure that it remains usable, and does
not become too complex."
This is the principle that while contributing to one
environmental objective, the activity in question
doesn’t significantly harm any of the additional
"There is, perhaps, not too much room for interpretation,
because otherwise we risk having something that is implemented
in different ways," said Podobnik.