Improved sustainability reporting rules can help Europe secure the investment it needs to meet its climate change targets, a paper published by the European Central Bank (ECB) on Wednesday reads.
The EU must ramp up investment, potentially by an extra €558 billion a year, or fail to meet its 2030 climate ambitions, the paper published by the ECB reads.
However, it says that while sustainable reporting rules support the flow of private funds into the green transition, their current set-up is limiting and in some cases may be counterproductive.
“The complexity of the rules currently limits the positive impact of these initiatives on green investments” the study adds.
It also described the rules as costly and “demanding”, citing as an example the EU’s taxonomy on green investments, and its “ high threshold” for an investment to be considered sustainable.
The question of what constitutes an environmentally friendly investment is hotly debated.
Prompted by some member states and industry concerns that the EU’s sustainability reporting rules are hampering competitiveness, European Commission President Ursula von der Leyen promised to simplify the framework in her second term.
The plan is to target not only the EU’s green taxonomy rules, but also the Corporate Sustainability Reporting Directive (CSRD), both of which are mentioned in the ECB study.
Although the paper calls for a streamlined revision of these rules, it stresses that this should be done “without backtracking on the fundamental objective of enhancing sustainability transparency”.
Stanislas Jourdan, policy expert at Sustainable Finance Lab, told Euractiv says that the report “fails to talk about the elephant in the room,” namely that “right now, green lending barely gets rewarded.”
Jourdan says the introduction of a green interest rate, “say 100 to 200 bps below the market rate” would be “a game changer”, and that the EU policymakers should get the ECB to implement such a measure directly.
[Edited by Donagh Cagney/Daniel Eck]
