How will green banking affect businesses soon?


Green banking is a term that refers to the raise of the level of financial flows in environmentally sustainable investments. The main principle of green banking is the balanced relationship between investment risk and ethical responsibility, towards businesses and citizens, having as a goal the cash flow in terms of environmental responsibility.

Green banking need comes at a time when Banks are already called to comply with several mandatory and voluntary regulations and requirements and as a result disclosure requirements are constantly increasing (π.χ. Directive 2014/95/EU as regards disclosure of non-financial information, disclosure requirements of the European Banking Authority, Task force on Climate-related Financial Disclosures (TCFD), European Central Bank’s supervisory expectations relating to risk management and disclosure, EU Taxonomy, etc.). Therefore, Banks are in the process of identifying trends and regulatory frameworks around environmentally sustainable finance and investment.

EU Taxonomy sets specific guidelines and technical criteria for the identification of eligible and aligned businesses and investments and at the same time promotes the provision of better terms funding to environmentally sustainable investments.

More funding factors result in a strong competition for the Banks in the global market, in terms of their adaptability to the new conditions and their ability to finance environmentally friendly and sustainable investments. Aiming to participate in the general market trends, Banks aim to promote these investments by providing better terms funding to companies and investments that are considered environmentally sustainable. Therefore, banking products management policies are updated to ensure the availability of products with sustainable or green features.

The European Central Bank (ECB) is also expected to play a key role in promoting environmentally sustainable finance and green banking. In the year 2022, the Banks are submitting the first key performance indicators of their exposures to eligible and non-eligible economic activities, in accordance with the EU Taxonomy Regulation. As a next step and after evaluating the quantitative and qualitative disclosures of the Banks, ECB is expected to push for the improvement of these indicators, by conducting a full supervisory review of Banks’ practices and take concrete follow-up measures where needed.

A way for the Banks to achieve the improvement of their indicators comes via assessing businesses and investments with environmental, social and governance (ESG) criteria. Businesses with a strong commitment to environmental, social and governance priorities (ESGs) can “score” higher than others on these criteria and therefore achieve better financing terms.

Therefore, to the question whether green banking is a challenge or an opportunity for sustainable development, the answer is clear: it is a one-way direction! Banks need to orient themselves on time towards green banking and follow specific environmentally sustainable funding criteria.

PRIORITY with its many years of experience in the fields of Environmental and Social Management, as well as Corporate Governance, in all sectors of the economy and especially in the Banking Sector, is well-positioned to be your consultant in the implementation of Green Banking strategies.