good morning to the @ecb for giving us reasons to be cautiously optimistic about its commitment to greening finance - from its response to the European Commission's Renewed Sustainable Finance consultation ecb.europa.eu/pub/pdf/other/…
1. ECB reiterates again problems with private ESG ratings: multiple providers, subjective criteria, and critically, not an appropriate measure of risk. 
2. ECB wants a credible verification system in place for private 'green' taxonomies, public-good data infrastructure (learning from the mess of trade repositories in derivatives reform) and ESMA to verify green bond standards
3. ECB supports Commission's double materiality approach that considers
(a) climate change impact on companies/financiers & (
b) companies/financiers' impact on climate change.
As @forfinancewatch notes, Blackrock famously pushes for (a) alone when lobbying in Brussels
(a) climate change impact on companies/financiers & (
b) companies/financiers' impact on climate change.
As @forfinancewatch notes, Blackrock famously pushes for (a) alone when lobbying in Brussels
4. Critically, as @BJMbraun points, ECB wants a brown taxonomy to supplement the Commission's green taxonomy. Commission already has mandate for this from Council.
It's important that regulators talk brown finance, because next step is penalising it.
It's important that regulators talk brown finance, because next step is penalising it.
5. Prudential vs promotional: ECB hints to penalising brown assets (identified from EC Brown Taxonomy) and rejects green supporting measures - encouraging given the scope for greenwashing from ESG-based green ratings.
Why cautious optimism:
1. ECB remains too ambivalent on private ESG ratings: ESG shouldnt be used as proxy for risk metrics but endorses EBA work on incroporating ESG risks in microprudential regimes.
1. ECB remains too ambivalent on private ESG ratings: ESG shouldnt be used as proxy for risk metrics but endorses EBA work on incroporating ESG risks in microprudential regimes.
if they are serious about greenwashing, public institutions should take a clearer stand on public vs. private taxonomies for greening.
otherwise, we get Blackrock advising the Commission on how to incorporate private taxonomies into regulatory regimes.
otherwise, we get Blackrock advising the Commission on how to incorporate private taxonomies into regulatory regimes.
2. ECB still frames greening finance as trade-off between 'climate urgency' vs. 'international competitiveness' of European finance.
threat of race to the bottom towards greenwashing.
threat of race to the bottom towards greenwashing.
3. ECB thinks green STS securitisation will magically unlock cheaper green finance, when
a. it promised prudential not promotional approaches.
b. STS securitisation is outcome of contested political process.
c. You'd get a lot more green if you properly penalised brown.
a. it promised prudential not promotional approaches.
b. STS securitisation is outcome of contested political process.
c. You'd get a lot more green if you properly penalised brown.
4. ECB wants private-public partnerships in climate insurance - with this it promotes the derisking state, socialising losses, privatizing profits.
nationalise insurance companies if private markets for insurance cant deal with climate crisis (and we'd get less shadow banking).
nationalise insurance companies if private markets for insurance cant deal with climate crisis (and we'd get less shadow banking).
5. Perhaps most surprising in light of Lagarde's recent interventions, 30 pages and nothing on greening the ECB's balance sheet, collateral and monetary policy operations.
6. While I get etiquette of not criticising your peer European institutions, ECB's embrace of forward looking sanctions the recent watering down of the EU Taxonomy with 'transition' and 'enabling' activities pushed by carbon financiers to help brown companies.
