Germany gathers speed in green financing norms

In a significant development, a strategic plan by the German government sees offshoots in new green financing norms aimed at steering capital towards environmental projects and developing Germany into a leading hub for sustainable finance.

The Sustainable Finance Strategy which plans on listing 26 individual measures is scheduled to be adopted by the cabinet on Wednesday with a view to mobilising investment for climate protection projects.

“The federal government wants to develop Germany into a leading location for sustainable finance,” states the plan, which is aligned with the United Nations’ Sustainable Development Goals.

The plan aims to support the European Union becoming carbon neutral by 2050 – a target set by the European Commission that estimates at least 350 billion euros to be invested annually. The plan is also responds to investors demands of companies complying with environmental, social and governance (ESG) criterias.

So as to assist investors, the federal government’s plan envisages a sustainability “traffic light” system that makes it easier to identify green investment opportunities. While Germany wants to coordinate this traffic light plan with that of the EU, however if that does not move ahead quickly with, it plans on moving ahead with the plan with the Federal Environment Agency.

As a starting point, the German government plans on increasing guarantees and export credit assistance for green projects, and plans on reallocating 9 billion euros in equities it holds in pension and welfare funds into green investments.

The strategy has political support especially with the Greens topping most opinion polls, German Chancellor Angela Merkel’s conservatives and their Social Democratic coalition partners are eager to tout their green credentials before September’s federal election.

The government also envisages issuing green bond this year similar to that of 2020 when it launched its first two green bonds with a combined volume of 11.5 billion euros. It also plans on launching a 30-year green bond later this month, with a 10-year issue to follow in the second half of the year.

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