In the European Union green investments are insufficient and their level of certification is low. It means that their effective environmental compatibility has not been ascertained: in short, these are investments that have very little greenery. The warning comes from the number one of the ECB, Christine Lagarde, who spoke on Wednesday at a video conference on the UN program for the financing of environmental policies.
According to a study by the Bank for International Settlements – argued Lagarde – often the "green" wording associated with some bonds is just "a fig leaf", to the point that "most green finance is not going in the right direction".
The problem is also quantitative: “Europe needs 290 billion euros a year in green investments for an extended period of time if we want to achieve the objectives set in the Paris agreements - added the president of the Central Bank - But if we look at the financial framework, we are just at 100 billion, therefore there are still two thirds of the amount that would be needed".
On the other hand, Lagarde recalled that "many governments are issuing green bonds, a clearly emerging market in the Eurozone and which we hope will still grow significantly". An important help in this direction will come from the post-pandemic recovery plan Next Generation Eu: "30% of the investments will be green, for a total of 270 billion euros", said Lagarde.
However, the certification chaos remains to be resolved. “Someone said that green finance is like the wild west: I say it's the jungle in the wild west – continued the former number one of the IMF – There are so many ratings and rankings to determine whether a bond is ESG or not, that many investors are lost. Clearly more needs to be done, because markets alone are not adequately pricing climate risk. In the absence of shared common definitions and of disclosure of companies, we need detailed information to assess whether the practices defined as 'green' are actually such”.
A task that “does not fall to the Central Bank, but to legislators and regulators – concluded Lagarde – However, given the market shortcomings, we wondered whether neutrality should be the parameter of our monetary policy purchases. I am not anticipating any conclusions (we will deal with them in our strategic review), but I think all central banks should ask themselves whether, by not including environmental risks in monetary policy assessments, we are actually accentuating them".
