Banks in Europe exposed to small- and medium-sized businesses constitutes a major challenge when applying for a new European Union classification system on climate-friendly investments due to insufficient data.
The report compiled by United Nations Environment Programme Finance Initiative and European Banking Federation studied the system’s impact on Twenty six of Europe’s largest banks.
Checking on SME lending and retail and testing the frame work on the lenders as well as investment and corporate banking.
The European Union sustainable finance action plan announced in 2018 produced a common classification system to define environmentally friendly investments.
The sixty seven economic activities assessed by taxonomy are designed in such a way that can steer the companies as they adapt business strategies to climate change.
The largest 500 companies of United states generate about 73% of revenues and 69% of revenues generated by 1200 global companies were not aligned with European Union. Taxonomy.
The global Head of responsible business at one of Spain’s largest banks, Antoni Ballabriga and anco Bilbao Vizcaya Argentaria South America said:
“We need to cover, as banks, a wider scope of companies not only listed corporate but also SMEs where practically no data will be available,”
“This wider scope means an increased level of complexity about the stock exposures for banks,” he said. “We are not talking about a few thousand of corporate clients, but hundreds of thousands or millions of customers.”
As banks try to offer more sustainable products, more amount of data will become available, which would track sustainability of the client collect data and in turn boost sustainable finance, Ballabriga said.
Third party climate related certifications could help the banks distinguish the greenness of an SME’s business.
