The European Association of Co-operative Banks (EACB) considers the work on EU ECOLABEL for Retail Financial Products as an important step and welcomes the possibility to comment on the 3rd Draft technical report of the JRC. The EACB has already expressed the co-operative banks’ point of view answering to the first two consultations on the preliminary reports and welcomes some of the novelties proposed in the third version of the report. Given the fact that Co-operative Banks are typically retail banks, who interface mostly with households and SMEs clients, we are answering to this specific consultation from the point of view of “distributors”. Please find below our detailed comments.
- EACB members have already expressed their support on the possibility to include savings accounts in the scope of the EU Ecolabel for Financial Products. However, some key general considerations and remarks should be taken into account when it comes to the traceability, earmarking, data quality to assess the eligibility of projects and transparency of the process. For some types of accounts, it is not possible to imagine structural solution and/or internal accounting procedures to allow for the traceability of each retail customers’ deposited money and their contribution to the total value of the green loans granted, due to the fact that there are no legal obligations that prevent the mobilisation of money deposited and used to ensure ‘separation’ and to limit transferability of the funds for other purposes. We believe that the final report should clarify better how this process could be established in practice. As a possible solution to solve this issue, we believe that for similar reasons, this problem has already been solved by the "sustainable capital markets" community, via the market practices on Green/Social/Sustainability bonds. According to this already tested market practice, the Green-bond issuing bank can track and attest these proceeds. This process does not require a "legal ringfencing" of any kind but simply the commitment to invest or reinvest the green bond proceeds to existing or new "green loans", ensuring, at the same time, transparency in the whole process. The same arguments could be used when designing deposits inclusion in the EU Ecolabel framework. For these reasons, we believe that the process to identify, trace, and report on the pool of eligible green bonds for the purpose of green deposits "issuance" should follow the same principles already existing for green/social/sustainability bonds.
- Although we acknowledge that the EU Ecolabel is a post-sectoral legislation voluntary label, we still believe it is unclear which ESG products (including in this case EU Ecolabelled products) the industry will be able to distribute to retail clients depending on their preferences. Whilst the EU Ecolabel product should be able to apply sectorial legislation, it is not evident how that will be achieved due to misalignment of concepts and definitions of ESG products between the SFDR (Article 8 and 9) and the MiFID draft Delegated Acts. As it stands, the proposed regulatory framework is a source of great uncertainty. For these reasons, our Members are concerned about the practicability of the envisaged proposal, as it might lead to a situation where a client can be offered Ecolabelled-products that would be categorized in both Article 8 and Article 9. This could create confusion among the market and defeats the scope of a labelling regime.
- Finally, the Commission has recently launched a very important consultation on the proposed Delegated Acts to the taxonomy regulation (climate change mitigation and adaptation activities). We believe that some of the new criteria introduced in the Commission’s proposal will have a huge impact on the possibility for banks to finance green activities. In our view, the Taxonomy can promote green financing and increase capital flows to environmentally sustainable activities if, and only if, the criteria are achievable for a reasonable amount of assets. With the proposed change in criteria related to the acquisition and ownership of buildings built before 2021, for example, the Taxonomy would most likely be ignored in financing of residential buildings and in funding the mortgages with covered bonds in many Member States. Those criteria are unachievable and risk to limit the availability of Ecolabeled financial products.
You can find more information in the annex.
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