Co-op banks explore their role in driving the green transition

The banks explored how they can support SMEs in the green transition, and the European Union’s role in facilitating this

European co-operative banks highlighted their role in the green transition during an event featuring sector leaders and EU representatives.

The hybrid event, COOP26: A client-centred green transition driven by co-operative banks, was hosted on 9 November by the European Association of Cooperative Banks (EACB) in collaboration with SMEunited, the association of Crafts and SMEs in Europe, in the context of the COP26 climate summit.

The EACB launched a call for 10 concrete policy actions from the EU and international regulators and policymakers, to achieve the objectives of the COP26. These include ensuring an inclusive climate transition, minimising disruption and job loss in the net-zero alignment process, incorporating the social cost of carbon (SCC) in economic and financial calculations, providing companies with tools for establishing their transition plans, establishing a public climate data hub, and Increasing transparency via labels and standards.

The apex also released a video with testimonies of their expectations of the support they need from banks to accelerate the transition of the real economy.

EACB CEO Nina Schindler said co-operative banks’ expectations regarding sustainability went far beyond financing. She explained that clients, particularly SMEs, relied on banks for advice.

During a panel discussion, the banks explored how ways to support SMEs in the green transition and the EU’s role in facilitating this.

“Tackling climate change is a must, there’s simply no alternative,” said Berry Marttin, president of the EACB. “But it’s also an opportunity for our economies to grow sustainably.

“Governments make the laws and regulations, by which they pave the ways for the energy and food transitions, but banks have a role too. I believe that as co-operative banks we can stimulate sustainability among our customers by using financial incentives and by offering access to our networks and sector knowledge. I am committed to ensuring inclusive transitions.”

The panel included Elisabetta Siracusa, special advisor on sustainable finance, DG FISMA, European Commission, who answered questions regarding the common classification system for sustainable economic activities, known as the “EU taxonomy”, which entered into force on 12 July 2020. The taxonomy establishes six environmental objectives. A first delegated act on sustainable activities for climate change adaptation and mitigation objectives was adopted in principle in June 2021 and a second delegated act for the remaining objectives will be published in 2022.

Ms Siracusa said SMEs are not for the moment subject to the same disclosure requirements as larger enterprises because the Commission intends to continue conversation with the sector.

Thierry Lebrun, head of ESG at Caisse régionale Nord de France, Crédit Agricole, highlighted some of his organisation’s initiatives to drive the green transition, such as incorporating ESG data in all its reporting. One in three renewable energy projects in France is financed by Crédit Agricole, he said, adding that the co-op also aims to encourage biodiversity and farmers’ green transition.

Clear policies and industry and sectoral strategies are also required to facilitate the transition, he said.

Mr Lebrun also raised concerns about the increased capital requirements under the Basel IV framework at a time when banks are being asked to take more risks and lend more for an industry revolution.

While co-operatives tend to adopt long-term strategies, some SMEs could only plan for short-term goals, he added.

“It’s fine to have a 2030 goal, now we need the goal for next year,” he said.

Gerhard Huemer, director of economic policy at SMEunited, said that some SMEs lack access to the knowledge required for the green transition.

“Banks can motivate and push them in that direction, co-op banks are very well-placed,” he said. But new standards for sustainability reporting might place an extra burden on SMEs, he warned – and “SMEs need predictable regulatory environments”.

Jacob Gyntelberg, European banking authority director for economics and risk analysis, said the regulation of banks is just one of the many policy tools available for the green transition. “There is a broader palette of tools than just banking regulation,” he said.

Johannes Koch, managing director of the strategy and corporate development at DZ Bank, said co-op banks are the SME experts and will therefore play an important role in supporting the sector’s transition. He warned that a lot of clients are not ready and need advice from banks, as well as a reliable framework that takes into account their specificity and is not targeted only at larger companies.

“Promoting the welfare of members is the key goal of co-ops” he said. “Sometimes it seems that banks are being used to make it happen, to be the policeman to push the real economy towards a goal in the future, but smaller companies have to make decisions every day so they need to know on what framework the companies will be analysed. We can’t give them that security, it’s not possible.

The EU Taxonomy is a helpful tool but doesn’t give all the answers. Uncertainty on what the framework will be will delay transformation.”

Bouke de Vries, chair of the Sustainable Finance Working Group at the EACB, concluded the session by highlighting the progress made in building trust amongst regulators, supervisors, co-op banks and clients.

“It’s possible, we can do this. he said. “We are committed, we need clear regulation and our clients need help. It’s not only about making the impact but also estimating the risk and controlling it.

“We are in great need of speed but don’t want accidents or green washing or being too optimistic about green projects.”

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