Dept. III: General Business Administration and Corporate Finance

Green and Sustainable Finance Cluster Germany

Competence centre and dialogue platform of the Frankfurt financial centre for achieving climate and sustainability goals.

The Green and Sustainable Finance Cluster Germany was founded in November 2017. It was initiated by Prof. Dr. Henry Schäfer, University of Stuttgart together with the Hessian Ministry of Economics, Energy, Transport and State Development. On the basis of a feasibility study by EccoWorks GmbH, which is close to the chair, the content requirements for the start of the cluster's work were met. For the first time, Germany has a new voice for the financial industry vis-à-vis similar initiatives already in place in London, Paris, Luexembourg, etc., in order to be able to effectively support measures and investments to achieve the climate protection goals of the German government and thus its international obligations under the World Climate Protection Agreement of Paris.

1. Mission

The transformation process to a "Green and Sustainable Economy" requires appropriate, innovative and scalable support from the financial industry. Due to complex interrelationships of global economic processes, it is necessary to enable innovative forces and competencies from the financial sector, investor circles, political decision-makers and civil society to cooperate in a network-like manner. The SFCG is an organization that coordinates and brings together such activities of various actors, thereby leveraging synergies and helping to make this transformation process efficient and cost-reducing.
"Green and Sustainable Finance" is a key point in the transformation process to a sustainable global economic system. Neither the achievement of the "Sustainable Development Goals" nor the implementation of the "Paris Climate Protection Goals" can be achieved without a fundamental change in the basic structure of national and international capital allocations. Against this background, the focus is now on developing application-oriented concepts for implementing sustainable criteria in the business models of the various players in the financial centre in order to proactively counter the risks of the upcoming challenges and intensified competition, but above all to recognise and exploit the economic opportunities of such change. This should also take into account the specific structure of actors in Germany, some of which is more SME focused.
The SFCG pursues an open concept. A network is to be created in which expertise in financial and risk issues is to be bundled. The SFCG is intended to serve as a central point of contact for actors in the financial sector and beyond on sustainability and climate-related issues. The aim is to promote a strengthening of the various Green and Sustainable Finance initiatives in Germany and Europe as a financial centre and to incorporate existing impulses. National initiatives such as the Hub for Sustainable Finance and others should be integrated into the work as well as European and international expert groups.

2. Goals

Competence: The members and sponsors of the SFCG position the SFCG at the financial center Frankfurt as a competence center and dialogue platform of the financial sector for achieving the climate and sustainability goals of the German government and the associated European and international responsibility of Germany as a business location. The financial sector is supported by application-oriented research.

Networking and efficiency: The SFCG enables the pooling, availability and exchange of existing competencies and technical resources in the financial and risk management of Green and Sustainable Finance. It also promotes the collection of innovative data that promotes the quantitative linking of traditional financial indicators with sustainability aspects and broadens the dialogue around Green and Sustainable Finance by involving all relevant stakeholders, such as public and civil society, as well as regulatory and political actors.

Added value: Concrete cost advantages and efficiency increases of the actors are to be generated through the use of synergy effects in the context of upcoming standardization processes, through the creation of a broad information basis and through the exchange of best practices. Furthermore, the identification and inclusion of new fields of intersection in the area of Green and Sustainable Finance is an equally processual goal as the establishment of common transparency and communication structures.

3. Core topics and tasks of a cluster

Creation of transparency: Existing products, opportunities and instruments should be made transparent and public through the work of the cluster as a central platform. Transparency as a core issue is fundamental for the understanding of green and sustainable finance among financial sector players and the general public. The presentation of the risks associated with the subject area and their consequences for financial institutions with a view to appropriate regulation, physical risks - such as damage as a result of climate change - and the associated liability issues is therefore of particular importance for the positioning of the SFCG. In this respect, the work of the Task Force on Climate-related Financial Disclosures (TCFD; a private sector initiative accompanying the G20 process) on carbon risks and their disclosure will be taken into account. Closely interwoven with this is the solution to the question of how an actually realizable reduction of climate-damaging influences can be measured (impact) and how resilience to climate change can be promoted.

Standardisation and certification: Existing approaches to standardising green and sustainable finance products and criteria (e.g. green bond principles) are to be recorded and evaluated with regard to their suitability for setting standards in various market areas. If gaps are identified, proposals for overcoming them are to be developed in close cooperation with research institutions. The aim is to develop common approaches to concretization and operationalization (example: what methods and measures can be used to assess the "under 2 degree compatibility" of financing?). For this reason, close cooperation with rating agencies, auditing and consulting firms is considered advantageous.

Research, knowledge transfer and communication: A key objective of the joint knowledge-sharing efforts is to develop practical criteria for capital market, real estate-based and on-balance-sheet green and sustainable finance products and the measurability of climate risks in the financial sector in order to help shape future regulatory efforts (such as advocating longer time horizons and defining reporting obligations for green and sustainable finance). Supra-regional and international cooperation is indispensable (cooperation with national, international and EU working groups and initiators).

In addition to the indispensable transfer of know-how to achieve synergies, a professional external presentation is also crucial for the success of SFCF. These include public events such as lecture series, presentations, workshops, seminars and practical studies.