Excerpt
Table of contents
List of abbreviations
1. Introduction
2. A sustainable financial system
2.1 The link between climate change and the financial system
2.2 Climate change and central banks
2.2.1 The role of central banks
2.2.2 Climate change and price stability
2.2.3 Climate change and financial stability
2.2.4 Climate change and portfolio management
2.3 The European Green Deal
2.3.1 Main aspects of the European Green Deal
3. The possible roles of the ECB in a sustainable financial system
3.1 Objectives and mandate of the ECB
3.2 The strategy of the ECB
3.3 The role of soft power of the ECB
3.3.1 Voluntary green finance guidelines and frameworks
3.3.2 Disclosure of the ECB carbon impact
3.4 The role of the ECB in macroprudential regulation
3.4.1 Climate-related stress tests
3.5 The role of the ECB in microprudential supervision
3.5.1 Disclosure requirements
3.5.2 ESG risk management standards
3.6 The role of the ECB in monetary policy
3.6.1 Green quantitative easing (GQE)
3.6.2 Green collateral framework
4. Restrictions of the ECB to engage
4.1 The role of independence
4.2 The connection of climate risk and credit risk
4.3 The ECB mandate and conflicting objectives
5. An evaluation of instruments - the PCT approach
5.1 An assessment of two instruments using the PCT approach
6. Conclusion
List of references
List of figures
List of abbreviations
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1. Introduction
In January 2020, the World Meteorological Organization (WMO) acknowledged the year 2019 as the second warmest year ever recorded. The WMO Statement on the State of Global Climate 2019 documented the physical symptoms of climate change as well as the impact on socio-economic development. In the context of this statement, UN chief Antonio Guterres emphasized that the world is far away from reaching the 2°C target as determined in the Paris Agreement (see United Nations 2020: 1).
In 2015, the European Union and 196 states adopted the Paris Agreement to establish the target of limiting global warming below 2°C above pre-industrial levels. In 2016, the countries have set themselves the goal of limiting the global temperature increase to 1.5 °C (see IPCC 2018: 8-10). The Paris Agreement acknowledged climate change as an urgent threat to the planet and human society. It aims “(...) to increase the ability of countries to deal with the impacts of climate change, and at making finance flows consistent with a low GHG emissions and climate-resilient pathway.” (United Nations Framework Convention on Climate Change 2020: 1). With this objective, the Paris Agreement sends a clear signal to the financial markets that a profound change in global investment flows is required. To fulfil this aim, public and private investments and especially long-term investments are supposed to shift towards sustainable practices (see Thwaites et al. 2018: 1).
Thence climate change poses a challenge to financial institutions. In January 2019, the European Parliament appealed to the European Central Bank to consider environmental, social and governance (ESG) factors in its policies and to revise its programme for the purchase of corporate sector securities “(...) to better support environmentally sustainable initiatives” (European Parliament 2020: 1). The primary mandate of the European Central Bank is to preserve price stability and an inflation target of below, but close to, 2%. The Treaty on the Functioning of the European Union emphasizes the primary objective on price stability, but also states “(...) Without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Union with a view to contributing to the achievement of the objectives of the Union(...)” (Estella 2018: 78).
Consequently, a debate has arisen as to whether the European Central Bank should take the aspect of sustainability into account in its policies. This thesis will therefore approach the research question: "What role can the ECB fulfil in a sustainable financial system?”.
First, the framework conditions and the need for a sustainable financial system will be explained. Afterwards, the effects of climate change on the financial system and particularly on central banks are evaluated. After a short introduction of the European Green Deal, the objectives and strategy of the ECB will be described to establish a base for the subsequent analysis. Different instruments in the areas of the ECB will be analysed with regards of the objective to support a transition towards a sustainable financial system. Subsequently the restrictions of the ECB to contribute be discussed. Eventually a qualitative approach to value the introduced instruments will be drawn and applied to two instruments.
2. A sustainable financial system
The term “sustainable” is defined as the quality of causing little or no damage to the environment and therefore able to continue for a long time (see Cambridge Dictionary 2020a: 1).
A “financial system” is described as a complex interaction of markets and institutional units, with the purpose of mobilizing funds for investment and providing facilities for the financing of commercial activities (see International Monetary Fund 2004: 12).
At this point in time, there is no single definition of a "sustainable financial system". According to the European Commission, the term refers to the consideration of environmental and social considerations in investment decisions. The inclusion of this criteria leads to more investments in long-term and sustainable investments (see European Commission 2018a: 2). The environmental considerations are specifically about adapting to climate change and mitigating its consequences. They also refer to general environmental aspects, like carbon dioxide pollution. Social considerations can relate to issues like inequality and employment and investment in people and communities (see European Commission 2018a: 2). In 2018, the European Commission published an action plan for a more sustainable financial system, addressed to the major EU institutions, including the European Central Bank. The action plan named “Financing sustainable growth” emphasizes that, to meet the targets of the Paris Agreement, major public and private investments are required to transform the economy of the EU (see European Commission 2019a: 1). The European Commission Vice-President for the Euro and Social Dialogue, Valdis Dombrovskis, argues that “(...) Europe needs between €175 to €290 billion in additional yearly investment in the next decades. We want a quarter of the EU budget to contribute to climate action as of 2021. Yet, public money will not be enough (...) the EU has proposed hard law to incentivise private capital to flow to green projects.” (European Commission 2019a: 1). In line with the action plan, the European Commission established a Technical Expert Group (TEG) on sustainable finance (see European Commission 2018b: 1). The TEG mainly consists of members from the academic; public; finance and civil society sector. Their mandate is to assist the European Commission, inter alia, in the development of an EU classification system (see European Commission 2018b: 1). The first section of the plan aims for an EU classification system for sustainable activities. A uniform classification system within the EU should provide clarity, which economic activities can be considered as sustainable. The European Commission followed this approach with a proposal for a taxonomy regulation. A taxonomy is defined as a uniform procedure, with which objects are classified according to certain criteria into categories or classes (see Cambridge Dictionary 2020b: 1). In December 2019, the European Parliament and the Council arranged a political agreement on the taxonomy (see Council of the European Union 2019: 2). The TEG on sustainable finance developed recommendations for relevant criteria of the Taxonomy Regulation, culminating in a final report, published in March 2020. The aim of the EU Taxonomy is to serve as a tool to help financial market participants to identify environmentally friendly investments (see EU Technical Expert Group on Sustainable Finance 2020: 2-7). The EU Taxonomy specifies performance thresholds for economic activities which “(...) make a substantive contribution to one of six environmental objectives (...) do no significant harm (DNSH) to the other five, where relevant; meet minimum safeguards (e.g., OECD Guidelines on Multinational Enterprises (...)” (EU Technical Expert Group on Sustainable Finance 2020: 2). The six environmental objectives consist of climate change mitigation; climate change adaptation; sustainable and protection of water and marine resources; transition to a circular economy; pollution prevention and control as well as the protection and restoration of biodiversity and ecosystems (see EU Technical Expert Group on Sustainable Finance 2020: 19-25).
Furthermore, the Taxonomy Regulation introduces detailed new disclosure requirements for two different groups. All companies belonging under the scope of the Non-Financial Reporting Directive (NFRD) are already required to publish regular reports on the environmental and social impact of their activities. Additionally, they will have to reveal the extent to which they are aligned with the Taxonomy Regulation (see EU Technical Expert Group on Sustainable Finance 2020: 27). Companies under the scope of the NFRD are approximately 6000 large public-interest companies each with more than 500 employees, including listed companies, banks and insurance companies (see European Commission 2017: 1). All financial market participants offering financial products in the EU are obligated to make Taxonomy disclosures, with detailed information about the sustainability of underlying investments and their proportion of the whole investment, depending on the specific financial product (see EU Technical Expert Group on Sustainable Finance 2020: 37).
In conclusion, there may is no single or legal definition for a sustainable finance system yet, but the European Commission considers a more sustainable financial system a key figure in the transition process to a low-emission, more resource-efficient circular economy and seeks to reform the financial system accordingly (see European Commission 2018a: 1-4). The first step was taken with the development of the Taxonomy Regulation, which will ensure a uniform definition of sustainability and classification of sustainability in the financial system. The taxonomy for climate change mitigation and climate change adaptation is scheduled for 2020, its full application by the end of 2021. For the other objectives, the taxonomy should be set up by the end of 2021, the application is scheduled for the end of 2022 (see European Council 2020: 1).
2.1 The link between climate change and the financial system
In the following section, the connection of climate change and the financial system will be examined in more detail. It will outline how the consequences of climate change can spread to the financial system and its participants like commercial banks; households; companies and insurers.
In 2015, climate change-related risks on the financial systems came to the fore after the Governor of the Bank of England, Mark Carney, delivered a speech named “The tragedy of the horizons”. In his speech, Mark Carney defined three channels through which climate change can affect the financial system, particularly financial stability: physical risks, liability risks and transition risks (see Carney 2015: 5-7).
Physical risks impact the society directly and have the potential to affect the economy: because of climate change, the world experiences extreme weather events like flooding, droughts and storms (see Bank of England 2015: 4). Physical risks can spread to the financial system through the disruption of global supply chains, as well as through the damage of property of companies. An example therefore are the Thailand floods in 2011, adding up to an economic damage of US$45 billion and US$12 billion in insurance claims as well as the closing of over 10.000 manufacturing companies due to property damage (see Bank of England 2015: 29). If the possible impacts from physical risks are insured, this has a direct effect on the risk management behaviour of insurance companies. If the demand for weather-related insurance rises, insurance companies need to increase fees to have a sufficient pay-out buffer (see Bank of England 2015: 28). Andrew Howard, Head of Sustainable Research at Schroders Investment Management, identified oil & gas, utilities and basic resources as the sectors most exposed to the physical impact of climate change (see Howard et al. 2018: 1). According to their study, the cost of insuring physical assets corresponds to more than 3% of their market values (see Howard et al. 2018: 1). Apart from financial insurance companies, physical risks also have an impact on commercial banks. Another physical risk example would be the increase of credit losses due to an unpredictable, extreme weather event. Climate change can lead to increased credit risks for banks, therefore experts argue that banks should integrate climate-related risks into their risk management framework (see Diakatos et al. 2020: 1). Institutional investors with large portfolios usually manage their risks through a balanced portfolio construction, including diversification, liquidity and asset selection (see Gründl et al. 2016: 8). Physical risks pose a challenge on some of these investors since their well-established portfolio risk management strategies do not take into account the possible physical risks from climate change (see Benedetti et al. 2019: 21). All in all, for the financial system physical risks can be felt especially through consequences along the value chain for business customers, counterparties and equity holdings.
Liability risks are the risks that could emerge every day by parties who suffered consequences from climate change and consequently pursue compensation for their losses (see Carney 2015: 6). The possible addressees can be environmentally harmful companies, but also insurance companies. A recent example is the Rhode Island’s climate liability suit. The state of Rhode Island accuses 21 companies, who knowingly contributed to climate change and failed to reasonably inform Rhode Island citizens about the risks posed by their products (see Savage 2019: 1). This example illustrates, that firms are also exposed to legal risks through climate change. Measuring liability risks is considered a major challenge because of the uncertainty and the variations in the different legal frameworks of different countries (see Bolton et al. 2020: 41). The Prudential Regulation Authority (PRA), a financial services regulatory body from the Bank of England, considers liability risk most relevant for general insures, because of the possibility of an increase of third-party liability claims (see Bank of England 2015: 7). According to the European Central Bank, insurance companies are particularly important for a stable financial system, because they are large investors in financial markets and are often closely linked to banks, thus are likely to increase systemic risk (see European Central Bank 2009: 160).
Transition risks refer to the financial risks that can occur when moving to a less polluting, low carbon economy (see Carney 2015: 6). These include risks from regulatory changes and technological changes, who are implemented to pursue the target of decarbonisation (see Ferrer 2019: 35). Examples for regulatory changes are strict emission limits as proposed in the Paris Agreement. Risks from technological changes refer to the speed of new technologies and the disruption of whole sectors that come with them, that may result in higher costs (see Carney 2015: 11). Moreover, there is a risk of changes in demand and services in all sectors resulting from emerging consumer preferences, as the society becomes more sensitive to environmental and sustainability issues (see Ferrer 2019: 35). For instance, if the policies of the government adopt the regulations of the Paris Agreement, a large proportion of fossil fuel reserves could not be used anymore. This would ultimately lead to changes in the value of investments owned by banks and insurance companies in sectors like oil and gas (see Bank of England 2017: 1). The figure 1 below provides a summarizing overview of the mentioned risks and their potential impacts on the financial system.
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Figure 1 - Overview of climate-related risk on the financial system (Own illustration)
After explaining the link between climate change and the financial system, the next section discusses the impact of climate change on central banks.
2.2 Climate change and central banks
Central banks implement the monetary policy and control the money supply of their nation, usually commissioned with the maintenance of a low inflation target. The current operations of central banks are often subject to frequent criticism, however their role within the economy is universally accepted (see Goodhart 1995: 60). After the financial crisis in 2008, central banks worldwide injected more than USD12 trillion of extra cash into the financial system to propel economic recovery (see Goodman et al. 2019: 1). Given the beforementioned immense investments required to swift towards a sustainable financial system, the public discussion arose whether central banks should occupy a central role in this challenge. This abstract briefly reviews recent discussions about the roles of central banks and their responsibilities.
2.2.1 The role of central banks
According to Mishkin (2005: 411) the six main goals of central banks and their monetary policy are high employment; economic growth; price stability; interest-rate stability; stability of financial markets, and stability in foreign exchange markets.
They can be divided into three main objectives: the maintenance of price stability, the maintenance of financial stability and the support of wider economic policy objectives (including economic growth and high employment). The financial crisis in 2008 sparked off a discussion about central banks and their inflation targeting strategy, contributing to the goal of price stability. Most economists believed that the best contribution central banks could make, was to focus on low and stable inflation rates (see Volz 2017: 6). This assumption was underlined by the inflation targeting framework. The framework is characterized by the announcement of official target ranges for the inflation rate, fostering the acceptance of low inflation as the main goal of monetary policy (see Bernanke et al. 1997: 97). Following the financial crisis, financial stability shifted into focus. Thus, the inflation targeting framework has been criticized for “(...) failing to address concerns other than price stability and most importantly for its disregard of financial stability.” (Volz 2017: 6). Even when environmental objectives are not included by name in a central banks mandate, the inclusion of sustainability aspects may be considered to carry out the main goals, price stability and financial stability. In the following abstract, these arguments will be outlined.
2.2.2 Climate change and price stability
Climate change can affect price stability (see Batten et al. 2016: 23). Physical and transition risks can influence the economy and the inflation performance. Climate-related shocks, like droughts and floods, can have an impact on monetary policy through supply-side and demand-side shocks (see Bolton et al 2020: 16). Demand shocks are unpredictable events that increase or decrease the demands for goods and services, supply shocks increase or decrease the supply or cost of goods and services (see McKibbin et al. 2017: 1). Climate change related extreme weather events can affect agriculture production and consequently food prices (see Volz 2017: 9). A study from the European Central Bank states that natural disasters, particularly storms, can trigger a prompt increase in food price inflation for the first six months (see Parker 2016: 25). Climate change policies like a carbon tax can affect energy production and energy prices (see McKibbin et al. 2017: 1-4). Both prices are components of inflation, and there is evidence that both prices are highly volatile (see Parker 2017: 28).
These price changes can have indirect effects on core inflation (see Volz 2017: 9). Core inflation is defined as the change in prices of goods and services without those from food and energy sectors (see Amadeo 2019: 1).
Therefore, Volz (2017: 9) argues that “Factors driving food and energy prices thus need to be included in central banks’ long-term inflation outlook analysis”.
2.2.3 Climate change and financial stability
There are two main, beforementioned transmission channels through which climate change can affect financial stability.
First, financial stability can be impaired through the effects of extreme weather events and natural disasters, referred to as physical risks as explained in abstract 2.1.Secondly, the financial system can be impacted by the “(...) the uncertainties related to the timing and speed of the process of adjustment towards a low-carbon economy, including the impact of the related policy action and potentially disruptive technological progress on the asset prices of carbon-intensive sectors”, referred to as transition risks (Giuzio et al. 2019: 1). Physical risks refer to the economic costs and financial losses caused by extreme weather events and the effects of long-term changes in the environment (see Bolton et al. 2020: 17). Through damages to assets, capital depreciation may take place, resulting in abrupt repricing of whole asset classes. As outlined in abstract 2.1, weather-related losses can affect the solvency of firms, insurance companies and households, and consequently the whole financial system. Transition risks are the risks that are associated with mitigation challenges. They include policy and legislation changes, reputational impacts, technological limitations as well as shifts in market preferences (see Bolton et al. 2020: 18). To reach the climate targets of the Paris Agreement, a major part of fossil fuel reserves is required to stay in the ground (see Verkuijl et al. 2018: 1-3). If these fossil reserves are not extracted, so-called stranded assets can arise (see Ivlevia 2017: 1). Stranded assets refer to assets which “(...) suffer from unanticipated or premature write-offs, downward revaluations or are converted to liabilities (...)” (Ansar et al. 2013: 9). These stranded assets pose a risk on companies that rely on fossil fuels, since these assets contain the risk of experiencing a devaluation or depreciation, that is not reflected in the value of the company (see Bolton et al. 2020: 19). Consequently, possible new regulations and legislations with the aim of decarbonizing will significantly impact carbon businesses.
A report by the Carbon Disclosure Project (CDP) states that out of 859 analysed companies, 75% consider transition risks as a major factor influencing their business in the future (see CDP 2019: 1).
Carney (2016: 7) argues that an abrupt movement towards a low-carbon economy could significantly influence financial stability by destabilizing markets, as costs and challenges that come with regulations require a reassessment of asset values. In conclusion, the main risk for financial stability from climate change is a widespread fall in financial asset prices that could impact the financial system (see Fisher et al. 2019: 16). Therefore, Volz (2017: 20) argues that these risks need to be addressed in the financial stability and macroprudential policy frameworks of central banks, at least to the extent that central banks have the task of maintaining financial stability.
2.2.4 Climate change and portfolio management
As outlined before, the effects of physical and transition risks may require reassessments of financial assets. Thus, climate change will also affect the investment portfolios under central banks’ management. Investment portfolios under the central banks’ vary depending on their mandates, but they may include policy portfolios; own portfolios; pension portfolios and third-party portfolios (see NGFS 2019a: 7). Therefore Cecot (2019: 2) argues that central banks need to consider environmental, social and governance (ESG) risks in their portfolio management. Central banks are committed to consider the demands of third-parties for whom they may manage assets (see Cecot 2019: 2). As public institutions, they “(...) would face reputational risk if they fail to address stakeholders’ concerns related to climate change and if they don’t lead by example.” (Cecot 2019: 2). To address this concern, the Network for Greening the Financial System (NGFS) developed a sustainable investment guide for central banks’ portfolio management (see NGFS 2019a: 1-21). The Network for Greening the Financial System is a global network of central banks and supervisory authorities. It was established in 2017 with the aim to contribute to the transition towards a sustainable, low- carbon economy and to analyse consequences for the financial system related to climate change. In April 2019, the NGFS released “A call for action”, acknowledging climate change as a financial risk and providing recommendations for central banks, supervisors, policy makers and financial institutions to manage climate-related risks (see NGFS 2019b: 1-4).
Apart from the financial system, calls for further climate action resulted in the European Green Deal, a concept from the European Commission, introduced in December 2019 (see European Commission 2019b: 2). The main targets and areas of the European Green Deal will be outlined in the next abstracts.
2.3 The European Green Deal
The European Green Deal was presented by the European Commission by Ursula von der Leyen in December 2019. Its main aim is to reduce the net emissions of greenhouse gases in the European Union (EU) to zero by 2050, making it the first continent to become climate neutral (see European Commission 2019b: 2). The European Green Deal belongs to the six priorities of the European Commission from 2019-2024. In the following abstract, the areas, measures and targets of the concept will be outlined.
2.3.1 Main aspects of the European Green Deal
“We are determined to tackle climate change and turn it into an opportunity for the European Union.”, concludes Ursula von der Leyen, president of the European Commission, after introducing the European Green Deal, also referred to as the “roadmap” towards green transition, to the European Council in December 2019 (see European Commission 2019c: 1).
The European Green Deal is a response to the climate challenges posed on the EU. It aims to transform the EU’s economy into a resource-efficient with zero net emissions of greenhouse gases by 2050. To reach this target, in March 2020 the European Commission proposed the European Climate Law to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions. The European Climate Law contains a legally binding target of zero greenhouse gases by 2050 and measures to control the progress towards it (see European Commission 2020a: 1-4). The Green Deal aims to divorce the growth of the economy from the use of resources (see European Commission 2020a: 2-4). The natural capital of the EU should be safeguarded, as well as its citizens, from climate change related risks (see European Comissions 2019b: 22). The term “natural capital” refers to natural resources like air; water; soil; minerals; forests and plants (see Cantrell 2020: 1). The Green Deal states that the transition that comes with it, needs to put people first, just like everyone who faces major challenges coming with it. Moreover, a close cooperation of citizens and EU authorities and institutions is required to enable a fundamental transition (see European Commission 2019b: 20-22). A huge amount of public investment will be required to carry out the transition. The creation of a sustainable, financial system which facilitates sustainable investments is considered as essential. Further, the European Green Deal states that the EU can use its competences to encourage neighbouring countries to pursue sustainability goals and, where appropriate, form joint alliances (see European Commission 2019b: 20-22). The main purpose here is to establish global standards for sustainability and to integrate climate issues into international relations (see European Commission 2019b: 2; 9).
The Green Deal contains various policy areas for actions. The area of sustainable food systems pursues a sustainable agriculture in the EU by modernising agriculture with innovative technologies and following the Common Agriculture Policy (CAP), which supports farmers (see Stolze et al. 2016: 9). The policy area of clean energy focuses on the decarbonisation of the EU’s energy system inter alia by integrating renewable energy hat aims to modernise the economy of the EU, especially tackling resource intense sectors like steel and cement (see European Commission 2019b: 7). Further areas include the protection of biodiversity; the elimination of pollution as well as the promotion of sustainable mobility (see European Commission 2019b: 4-10). In May 2020, two core strategies of the Green Deal were introduced. The “Farm to Fork Strategy” is designed to make the food system of the EU more sustainable, inter alia by reducing the use of chemical pesticides and by a revision of the date marking in order to minimize food waste (see European Commission 2020e: 1). The “EU Biodiversity Strategy for 2030” is intended to protect the biodiversity of the European Union, planned measures include the establishing of more protected areas of land and sea, the planting of 3 billion trees until 2030 and a zero pollution action plan for air, soil and water (see European Commission 2020f: 1).
The figure below provides an overview of the main aspects and measures in the different policy areas. It shows, that two of the key points of the Green Deal are the financing of the whole transition as well as the mantra “Leave no one behind”, which aims to foster the message of an inclusive Europe. In addition to that, the figure shows that the framework of the Green Deal is based on the enhancement of innovation and research.
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Figure 2 - Overview of the European Green Deal (European Commission 2019b)
In January 2020, the European Commission proposed a €100 billion “Just Transition Mechanism”, which includes three pillars - the “Just Transition Fund” (JTF), a just transition scheme as well as a public sector loan facility (see European Commission 2020b: 1).
The Just Transition Mechanism is an element of the €1 trillion investment plan for the Green Deal. In May 2020, they published details regarding the public sector loan facility in cooperation with the European Investment Bank (EIB). The facility will include €1.5 billion from the EU budget and around €10 billion in loans from the EIB.
For the JTF, the European Commission proposed €10 billion from the EU budget and €30 billion from the “Next Generation EU” fund (see European Commission 2020c: 1). The emergency instrument “Next Generation EU” is a temporary measure to support the reconstruction of the EU, it increased the EU budget by additional €750 billion (see European Commission 2020d: 1).
After the presentation of the European Green Deal by Ursula von der Leyen, the president of the European Central Bank, Christine Lagarde, announced that she wants the European Central Bank to contribute more actively towards the challenges of climate change. She stated that the role of sustainability will be subject during the strategy review of the European Central Bank in 2020 (see European Central Bank 2020a: 11). As a result, the public discussion emerged, whether the European Central Bank should intervene in the fight against climate change or even include the topic of climate change in their strategy. To further investigate this topic, in the next abstract the objectives and the mandate of the European Central Bank will be outlined.
3. The possible roles of the ECB in a sustainable financial system
In the following, the possible roles of the ECB in a sustainable financial system will be discussed. Since there is widespread disagreement whether climate-related activities should be in scope of the ECB, the objectives, mandate and strategy of the ECB will be outlined first. Central banks can employ various policy instruments to pursue sustainability targets (see Volz 2017: 20). The following section distinguishes four different policy areas, including central bank soft power, macroprudential regulation, microprudential supervision and monetary policy. For each of the four areas, different policy instruments and tools, which could be introduced to support the transition towards a more sustainable financial system, will be discussed.
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