28th Feb 2024

'Green' banks lend most to polluters, reveals ECB

  • The ECB based their findings on confidential lending data from 101 eurozone banks (Photo: ECB)
Listen to article

Researchers at the European Central Bank (ECB) revealed that commercial banks in the eurozone, touting themselves as environmentally responsible or 'green', are, in fact, major contributors to new lending for significant polluters.

In a blog published on Wednesday (6 December), the bank supervisor announced that commercial lenders that talk a lot about environmental disclosure issued approximately four percent more loans to the worst polluters than average banks.

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The blog post follows a November speech by ECB's executive board member Frank Elderson, who leads the bank's green efforts, in which he warned commercial banks to satisfy the ECB's climate requirements by the end of 2024 — or else pay a penalty for every day.

"Let me be clear: it is not for the ECB to tell banks who they should or should not lend to," he said. "[But] failing to manage climate and environmental risks adequately is no longer compatible with sound risk-management.

The ECB has pressured commercial lenders to enhance climate disclosures and improve risk assessments for three years.

But researchers found most banks, even the ones claiming to be green, failed to adapt their lending practices to the realities of global warming.

By analysing 'green' disclosures of 101 systemically-important eurozone banks and comparing them to new loans to polluting sectors between 2014 and 2022, they were able to "shine a light on a serious disconnect between banks' environmental disclosures and their lending practices."

These "arise because banks are reluctant to disrupt established lending relationships with larger carbon footprint borrowers," the economists wrote.

One of the economists is team lead at the ECB, supported by three academics from different European and US universities.

Banks presenting themselves as environmentally-conscious allocated more funds to polluting industries.

The claim by some banks that these loans helped so-called 'brown' borrowers move toward greener technologies was unfounded, according to the ECB economist, because the polluting companies failed to reduce emissions or commit to voluntary emission targets.

"Strikingly, these banks also show a reluctance to lend to firms that could potentially drive innovation in cleaner technologies," the researchers wrote.

Banks increase their exposure to climate risk by continuing to lend to polluters, which may result in losses further down the line.

But they keep lending to big polluters to "keep borrowers alive and avoid realising losses on the balance sheet," the blog concludes.

Reducing their exposure to these companies would minimise risk, but the blog's authors concluded there were "insufficient incentives for banks to change their lending policies."

With the ECB's announced penalties, the ECB hopes to move commercial lenders to account for the climate and environmental risk of their lending practices in 2024.

Continued failure to do so would "increasingly call into question the fitness of those in charge of establishing and steering the banks' practices," said Elderson.


Is the ECB sabotaging Europe's Green Deal?

The European Central Bank (ECB) recently raised interest rates to the highest point in the currency's 21-year existence — but the effects of its policies on renewables are badly understood.


Are ECB economists a 'tribe' or 'violinists'?

This week, a debate erupted between central bankers on whether economists are better described as a "tribal clique" (European Central Bank boss Christine Lagarde) or "violinists" (former deputy governor of the Irish Central Bank.)

Angry farmers block Brussels again, urge fix to 'unfair' prices

Following weeks of demonstrations across Europe, farmers returned to Brussels to protest over unfair competition in prices, as EU agriculture ministers met just a few metres away to discuss a response. The police used water cannon and tear gas.

Latest News

  1. Macron on Western boots in Ukraine: What he really meant
  2. Amazon lobbyists banned from EU Parliament
  3. MEPs adopt new transparency rules for political ads
  4. EU nature restoration law approved after massive backlash
  5. Memo from Munich — EU needs to reinvent democracy support
  6. For Ukraine's sake, pass the EU due diligence directive
  7. All of Orbán's MPs back Sweden's Nato entry
  8. India makes first objection to EU carbon levy at WTO summit

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Stakeholders' Highlights

  1. Georgia Ministry of Foreign AffairsThis autumn Europalia arts festival is all about GEORGIA!
  2. UNOPSFostering health system resilience in fragile and conflict-affected countries
  3. European Citizen's InitiativeThe European Commission launches the ‘ImagineEU’ competition for secondary school students in the EU.
  4. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  5. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  6. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA

Join EUobserver

EU news that matters

Join us