26 banks test the application of the EU Taxonomy to core banking products

26 January 2021

UNEP FI and the European Banking Federation (EBF) have launched a unique report assessing the extent to which the EU Taxonomy on Sustainable Activities could be applied to core banking products for labelling or disclosure purposes. This report is the result of a project with 26 major banks, seven banking associations and five observing organisations working together to test, pilot and assess the complexities of applying the EU Taxonomy, which is aimed mainly at investors, to core banking products.

From March to August 2020, banks participating  in the project  tested the EU Taxonomy on more than 40 live or recently closed transactions and existing client relationships, across a large spectrum of sectors and economic activities, and a diverse set of banking products, clients’ corporate structures and geographical locations providing unique insight and information value.

The objective of “Testing the application of the EU Taxonomy to core banking products: High level recommendations” was to develop an initial understanding of the application of the EU Taxonomy to banking products and propose a set of recommendations to enhance applicability and address the identified practical and conceptual challenges. It shares key insights from the information collected, including case studies and subsequent discussions between participating banks, focusing on the benefits and challenges experienced by banks whilst also proposing high level principles to follow in order to apply the EU Taxonomy to retail banking, SME lending and corporate banking, including trade, export and project finance. 26 of the case studies, covering a representative sample of various banking products, are available in the published report.

“At UNEP FI we see the EU Taxonomy as the backbone of a truly transformative agenda. By increasing market transparency and pointing to what is ‘good enough’ from a sustainability perspective, the EU Taxonomy has the potential to direct the flow of finance necessary towards green and sustainable innovation in the economy. We are fully committed to supporting banks throughout their sustainability journey and towards implementing the EU Taxonomy in line with the European agenda for sustainable finance.” – Eric Usher, Head, UNEP FI

The testing exercise also led to eight recommendations directed to legislators, regulators, owners of environmental and social standards and frameworks, labels and certification schemes used by banks to address the identified challenges, and to the banks themselves. UNEP FI and the EBF trust that this report will foster further discussions and facilitate the implementation of the EU Taxonomy in the banking sector.

This report is being delivered at the time of an unprecedented transformation within the banking industry. Globally, banks are progressively committing to accelerating the transition to a net zero carbon economy. Individually or collectively, banks are setting sustainability targets and aligning their business operations and strategies with the SDGs and the Paris Agreement as demonstrated for example by the 200 signatories to the Principles for Responsible Banking. The decisions banks and their clients make today will steer the economy for years to come and define the societies and the quality of the environment for future generations.

Download the report here.

The project was sponsored by BBVA, BNP Paribas, Credit Suisse, Danske Bank, Deutsche Bank, FMO, ING, SEB, Société Générale, Standard Chartered, UBS and UniCredit.


CEO quotes

“The EU Taxonomy will be a game changer on our common path to fulfil the Paris Agreement, and I am convinced that this will lead to a major shift when used in practice. Since banks play a key role in this transition, it is important that the EU Taxonomy recognises the specificities of core banking products, and that compatibility between EU Taxonomy and other applicable regulations is ensured. We are proud of having participated in its development, and as a sponsor of the joint UNEP FI and EBF project, I now look forward to the future work on developing detailed guidelines.”

Johan Torgeby, President and CEO at SEB and Chairman of the Executive Board, Swedish Bankers’ Association

 

“The EU’s Sustainable Finance Taxonomy plays a critical role in defining sustainable economic activity within Europe and beyond, thus delivering sustainable finance where it matters most. Standard Chartered’s participation in this pilot project has enhanced our preparedness and capacity to support our clients with the EU Taxonomy over the coming years.”

Bill Winters, Group Chief Executive, Standard Chartered

 

“At ING we are more than happy to contribute to the development of the fantastic work of UNEP-FI and the European Banking Federation on the EU Taxonomy. We see the Taxonomy as a sustainable finance tool not only for asset managers but also for banks, as we can play an important role in financing the transition to a low carbon economy. This will certainly help us in steering our lending portfolio towards the Paris Agreement’s climate goals, which we call our Terra approach.”

Steven van Rijswijk, CEO, ING

 

“Helping our clients transition towards a sustainable future is a strategic priority for BBVA. Banks can play a key role providing advice and channelling funds to big corporates, but also to SMEs and households. The EU Taxonomy is a fundamental step in this direction and the pilot project promoted by UNEP FI and EBF is a great starting point to test and facilitate its applicability.”

Carlos Torres Vila, Chairman, BBVA

 

“Banks should play a crucial role in accelerating the necessary global transition to sustainable, low-carbon and socially inclusive economies. Our aspiration at Deutsche Bank is to support our clients in their transition. But we also need other stakeholders— and especially the European Union—to pave the way and establish common standards. We were one of the first banks in Europe to operate a taxonomy linked on a best effort basis to the EU Taxonomy, and as one of the sponsors of this UNEP FI and EBF initiative we promote a broader discussion and application of the EU Taxonomy.”

Christian Sewing, CEO, Deutsche Bank

 

“Société Générale is fully supportive of the objective of the EU Taxonomy. Having common definitions is critical for strengthening the confidence of investors in sustainable finance. Industry guidelines will assist the application of the Taxonomy to the specific nature of banking activities and should further reflect transition activities. Over time, the Taxonomy has the potential to become a mainstream tool for steering efforts to reach the goals of the Paris Agreement and inspire methodological convergence across jurisdictions.”

Diony Lebot, Deputy CEO, Société Générale


Contact:

Mustafa Chaudhry, Communications, UNEP FI – mustafa.chaudhry@un.org


About the United Nations Environment Programme Finance Initiative

United Nations Environment Programme Finance Initiative (UNEP FI) is a partnership between UNEP and the global financial sector to mobilize private sector finance for sustainable development. UNEP FI works with more than 350 members—banks, insurers, and investors—and over 100 supporting institutions– to help create a financial sector that serves people and planet while delivering positive impacts. We aim to inspire, inform and enable financial institutions to improve people’s quality of life without compromising that of future generations. By leveraging the UN’s role, UNEP FI accelerates sustainable finance.

About the European Banking Federation

The European Banking Federation (EBF) is the voice of the European banking sector, bringing together national banking associations from across Europe, with active members in 32 countries. The EBF is committed to both promoting a thriving European economy underpinned by a stable, secure and inclusive financial ecosystem, and contributing to a prosperous society in which financing is available to fund the dreams of citizens, businesses and innovators across the globe.

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