The European Union’s planned metric for showing which banks have the greenest balance sheets won’t reflect their efforts to put the economy on a more sustainable footing, according to a German lobby group.
Banks will probably have green asset ratios in the “low single-digit” percentages when the metric takes effect next year, the Association of German Banks in Berlin said in a statement on Monday. That’s a very limited view of a lender’s sustainability profile, the lobby said.
The EU is pushing banks to improve the information they disclose on risks they face from climate change, both in terms of losses from extreme weather as well as loans to polluting companies that may go out of business. Lenders are also key to the bloc’s efforts to decarbonize the wider economy, because European firms rely more on bank credit than their US peers.
The lobby group conducted a study of whether 450 European companies meet the EU’s so-called taxonomy for assessing sustainability. It found that only a fraction of the economy meets the taxonomy criteria.
As such, politicians and regulators should refrain from developing policies based on the green asset ratio, the lobby said. The value of the metric could be improved by addressing “methodological mistakes” and expanding it to include project finance, such as for wind parks, according to the German lobby.
