5 people greening finance (2024)

This article is part of POLITICO’s Changemakers series, looking at the players driving European policy.

Green and sustainable finance is all the rage in Brussels.

The new European Commission is promising to present a second legislative package in the fall, including an EU standard for green bonds, a sustainability label for retail investment products and a revision of corporate disclosure duties regarding their environmental impacts.

Green finance is growing fast, pushed by high demand and a heightened policy focus on climate change. In Europe, total assets committed to sustainable and responsible investment strategies grew by 11 percent from 2016 to 2018 to reach €12.3 trillion, about half the Continent's total assets under management.

A lot of that money is going to have to be invested in the EU's decarbonization strategy to hit the European Commission's Green Deal goal of becoming climate-neutral by 2050.

The European Green Deal Investment Plan aims to mobilize at least €1 trillion in sustainable investments over the next decade, but more cash will be needed.

Revamping the world's financial architecture needs a lot of deft plumbers. Here are five people and organizations contributing to greening money flows.

Mark Carney

One person has helped more than most to make green financing the agenda-topping issue it is today: Bank of England Governor Mark Carney.

Carney took what was still a relatively fringe issue and gave it a huge blast of publicity, spelling out the stakes in a 2016 speech.

Calling climate change “the tragedy of the horizon,” he went on to say that its worst effects would be felt by our descendants.

“Sadly, with respect to climate, history repeats itself — not as farce but as tragedy, with growing frequency,” Carney said at the time. For many in the financial sector, the speech marked the moment when big money started paying attention to sustainability.

Carney used his authority as both the chief of one of the world's leading central banks and the head of the global regulatory body, the Financial Stability Board, to push through rule changes aimed at making banks and investors aware of the risks of climate change.

The Bank of England launched stress tests to determine which institutions would be worst affected by a warming planet.

The U.K. and EU are well on the way to imposing binding environmental disclosure requirements on companies and legislating toward net-zero economies, in no small part thanks to Carney’s persistence in highlighting these problems before they were mainstream concerns.

“A question for every company, every financial institution, every asset manager, pension fund or insurer: What’s your plan?" Carney told the BBC in December.

Carney isn't dropping climate. When he exits the Bank of Englandnext month, he'll become U.N. green finance envoy and adviser to the British government for November's COP26 climate summitin Glasgow.

Christine Lagarde

The European Central Bank’s new president is determined to make a difference in the fight against climate change — but she's not using the bank's €2.7 trillion bond-buying program to do so.

EU lawmakers in Brussels had hoped the Frankfurt-based institution would use the program to favor greener investments, while scrapping carbon-intensive assets from its massive portfolio.

They had good reason to; last September, Lagarde suggested using the ECB's so-called asset purchase programto fight climate change in her Parliament hearing as a candidate for the presidential post.

“I’m fundamentally convinced that fighting climate change has to be a central plank of policy,” she said at the hearing.

Lagarde has since pulled back on focusing firepower on green goals, promising instead to preserve market neutrality in the ECB’s portfolio and keep the eurozone’s economy ticking over.

This doesn't mean she's scrapped her green intentions. The ECB has introducedclimate change into its macroeconomic forecasts under her presidency, and ensures that eurozone banks take environmental risks seriously.

Closer to home, Lagarde has said the ECB’s corporate pension portfolio for employees could hold more green assets.

There has also been talk within the ECB of demanding greener collateral from banks wanting to borrow from the central bank.

An unlikely parliamentary duo

An ideological gulf separates Sirpa Pietikäinen, a former environment minister and MEP for Finland’s conservative-liberal National Coalition Party, and Bas Eickhout, the combative Dutch deputy leader of the Greens in the Parliament.

This didn't stop them from forging an unlikely alliance in the European Parliament last year on the issue of sustainable finance.The so-called taxonomy regulation sets rules for financial operators to measure investment products marketed as green against a binding EU standard for sustainable investments, and disclose to what extent they align with it.

When Eickhout got the rapporteurship of the sustainable finance regulation, he brought along the Finn from the European People’s Party. The reason? To seek out a compromise that would allow them to push the file through Parliament, presenting a united front in the face of a highly divided Council.

The effort worked well.

Both sit on the ECON and ENVI committees and have been MEPs for over a decade, giving them heft both within their political groupings and negotiations with the Commission and Council.

Despite occasional disagreements over the scope of the regulation the two achieved their goallate last year, and reached a deal with the Council both sides could call a victory.This is crucial to greening the bloc's finance, as theCommission has signaled the taxonomy will be used as a basis for an EU standard for green bonds and an eco-label for retail investment products.

The unlikely alliance isn't over; Pietikäinen is already being vocal about an upcoming package on sustainable finance, scheduled for the fall, and on the revision of companies’ rules for non-financial disclosures — something the Greens are likely to jump on as well.

Shareholder activists

Sometimes it takes more than a single person to make changes to the financial system. When it comes to making businesses take climate change into account, shareholder activists can take a bow.

Pioneering in this space are organizations like Carbon Tracker, Share Action and the Carbon Disclosure Project (CDP). They have long understood that the way to change the economy is to hit businesses where it hurts: their bottom lines.

These organizations model climate risks for capital markets and investors, lobby companies for greater disclosure of their climate-related risks and engage with investors at all levels to ensure they think of the climate when making investment decisions.

“Ultimately the goal is that investors want to understand which companies manage their environmental risks and opportunities very well," said Stephen Tebbe, head of CDP’s European operation. "The cost of capital for those companies would go down — they’ll be less risky. The cost of capital for bad companies that aren't transparent at all or have no business strategy to become sustainable will go up and eventually go out of business.”

Starting small, the movement has underlined the financial risk of ignoring global warming. Today, many of the world's largest investment firms are reacting.

A sign of that was a shift of policy by BlackRock, the world's largest asset manager, in January. The firm joined the Climate Action 100+, a major investor effort to pressure the most polluting companies.

CEO Larry Fink explained why. "The evidence on climate risk is compelling investors to reassess core assumptions about modern finance," he wrote.

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