Stop whining about new ESG rules, says banking regulator
Europe’s banks need to stop complaining that a new ESG rule will make them “look bad” and accept that they’ll need to start reporting additional data in a few months, European Banking Authority Chairman Jose Manuel Campa said.
The metric in question is the green asset ratio, with mandatory disclosure set to kick in from January. Supported by the European Central Bank and lambasted by the finance industry, the ratio reflects the share of a bank’s balance sheet that aligns with the EU’s list of sustainable business activities.
“The banks are concerned the ratios are going be too low” and “they’re going to look bad because they’re too low,” Campa said in an interview at the EBA’s Paris headquarters. “But what’s the alternative? Don’t do anything, don’t report anything until I know the perfect figure?”
A handful of banks have already started reporting. Earlier this month, DNB ASA of Norway said its 2022 ratio was in the range of 6% to 7% — in other words, a maximum of 7% of the lending it does goes toward green businesses. Preliminary figures suggest GAR is likely be a single digit for most banks for a variety of reasons, including the recurring data problems that characterize ESG disclosures.
Still, the figures are likely to alarm sustainable investors already concerned the industry is too exposed to fossil fuel clients. That’s as a number of pension funds make clear they’re monitoring banks’ loan books with a view to potential divestments, unless financed emissions come down rapidly.
Campa acknowledged that the first impression bank stakeholders will get of the green asset ratios they see will be “incomplete.”
There’ll be “all kinds of qualifiers that the banks can put into it about what they measure, what they don’t
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