National Development Banks in Europe – A Contribution to Sustainable Finance

Abstract

Purpose: The paper explains critical changes to investment funding occurred over the past fifteen years in the European Union and explores the added value that National Development Banks create for sustainable finance. The delivery of the European Green Deal and the recovery from the Covid-19 pandemic require an unprecedented scale of resources. The need to adopt a new sustainable investment approach and adjust the operation of the financial system has become inevitable. Existing research has underlined the role national development banks play in counter-cyclical measures and promotion of the government’s public policy goals. However, their standing in the sustainable finance landscape has enjoyed less attention so far. The paper, therefore, looks at how the remit of the Banks has evolved and assesses their progress and further development needs in relation to promoting sustainable finance. Design/Methodology/Approach: The research has followed a two-phase design. The first phase has included the examination of the operational setting of National Development Banks and their impact on overcoming market failures and improving access to finance. The second phase concentrated on drawing a comparison between the new regulatory requirements, in particular the European Green Deal, the EU Taxonomy Regulation and the functioning of the National Development Banks. The methodology has included a detailed literature review, desk research, data collection and re-assessment of earlier surveys, which has been used for prescriptive comparative analysis and cluster analysis. Findings: The paper concludes that National Development Banks, despite their common goals and mandates, demonstrate important variations in terms of government involvement in strategic direction and decision-making and the Banks’ actual contribution to national policy goals. The outcome confirms the hypothesis that recent changes to the EU strategic and regulatory framework only require minor amendments to the direction of NDB investments. Their original setup and objectives are already in accordance with the new expectations and they invest mostly in economic sectors that the new taxonomy system classifies as sustainable. Practical Implications/ Originality/Value: This is important for the scholarly discourse on the essential conditions for sustainable finance. Meanwhile, the results provide usable guidance for development banks/funding agencies in Europe, too. The paper offers a solid ground for continued explorations of the European financial sector, whereas the recently adopted Digital Finance Package could further widen the agenda of the research direction.

How Practically Applicable Are the EU Taxonomy Criteria for Corporates?—An Analysis for the Electrical Industry

“…Nevertheless, upon closer examination, it was observed that two studies merely touched upon the EU taxonomy as a peripheral topic rather than examining it as a primary focus [30,31]. In contrast, the remaining seven studies predominantly delved into the application and implications as well as the overall effectiveness of the EU taxonomy, including its effectiveness in redirecting capital towards sustainable investments [32,33], its impact on corporate investments [34] and the banking sector [35,36], its potential application in constructing environmental risk indicators [37], and its linkage to loan interest rates and future CO 2 prices [38]. When focusing on the corporate context (searching "corporate EU taxonomy" within the title, abstract, and keywords, limiting the search to English-language articles from 2020, when the TR entered into force, and the keyword "corporate"), a mere six relevant hits were obtained, of which three were deemed irrelevant to the research question.…”