Green finance – opportunities for the Austrian financial sector

Andreas Breitenfellner, Susanne Hasenhüttl (), Georg Lehmann () and Andreas Tschulik ()
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Susanne Hasenhüttl: Österreichische Gesellschaft für Umwelt und Technik
Andreas Tschulik: Federal Ministry for Climate Action, Environment, Energy, Mobility, Innovation and Technology

Financial Stability Report, 2020, issue 40

Abstract: Climate change and the internationally agreed decarbonization of the global economy not only pose risks to the financial sector and the economy but also open up opportunities. While focusing on the risks, mandate-driven central banks and financial supervisors also need to understand the dynamics and potential of green or sustainable finance markets. The investment needs at the global, European and national level to fund the transition to a climate-neutral economy are mind-blowing. Earmarked public funds alone will not suffice. In addition, financial markets will have to channel (excess) resources above all into sustainable projects. In other words, breaking out of its niche, green finance will have to scale up. Though dynamic, the development of Austria’s green finance markets is still sobering. At the same time, customer surveys suggest that demand for sustainable finance products will grow. The absence of common definitions of sustainability may give rise to “greenwashing,” i.e. making misleading claims about the environ-mental sustainability of a financial product. To prevent this, regulators and supervisors should help overcome market barriers and dysfunction on the supply and demand side. Noteworthy efforts in this respect are the European Commission’s action plan on sustainable finance, the ECB’s paying greater attention to climate change issues as well as the Austrian government’s green finance agenda. Predefining a credible pathway for linking carbon pricing to greenhouse gas emission targets would be the most effective – and least distorting – way to foster green finance and a smooth transition.

Keywords: climate change; financial market development; sustainable finance (search for similar items in EconPapers)
JEL-codes: G2 O16 Q54 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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