Merkel says financial markets must change to better support climate action

Germany’s Chancellor Angela Merkel says the need for a reform of financial markets along sustainability criteria is one of the most pressing challenges the sector is facing. In a speech at the annual meeting of Germany’s savings banks (Sparkassentag), Merkel said the current debate about more ambitious climate action, which was highlighted by the Fridays for Future school student movement, could not be answered “by looking at environmental questions only”. Merkel said climate change concerned all sectors of the economy, “which is why it is necessary to better illustrate the climate-related risks on financial markets, to strengthen sustainable financial instruments and to create conducive surrounding conditions”. The chancellor said sustainable finance could help to increase the financial system’s stability and efficiency and would also contribute to reaching the Paris Climate Agreement’s targets. “These are two of the reasons why the German government this year decided to develop a strategy that aims at making Germany a leading sustainable finance location,” Merkel said, calling on the savings banks to advertise the topic with their customers. She added that national measures alone would not suffice to bring about change in the globalised financial system, arguing that the EU action plan on sustainable finance provided guidelines for international action on the issue that had to be implemented “in an effective and workable way”.

In a recent report, the international economic cooperation body OECD highlighted the need to take long-term decisions for the sustainable transformation of the finance sector soon. Financing the expansion of low-emissions technology as well as pulling money out of climate-damaging investments, such as fossil fuel extraction, are seen as key steps for the financial sector to gear the economy towards a path that is compatible with international efforts to limit global warming.