Making Finance Flows Consistent with the Aims of the Paris Agreement: Roles, Obligations, and Limitations of the EU Banking Sector and Its Regulatory and Supervisory Institutions

While linkages of the banking sector to climate change are manifold, the Paris Agreement (PA) merely generally refers to the financial sector in Article 2(1)(c). Subsequent Conferences of the Parties recognise the importance of private financial flows for climate change mitigation and adaptation. The EU banking sector has increasingly faced criticism for not adequately addressing the climate change impacts of its activities. Controversy exists on how to integrate climate change into the banking sector activities effectively and how to adapt the regulatory framework accordingly. The article discusses the potential roles and responsibilities of the private banking sector, banking supervisory authorities, and central banks in the EU regarding climate change mitigation and adaptation. It assesses whether and how these actors already contribute to the PA objectives and EU climate goals and which impediments and alternative options exist when pursuing these goals. On this behalf, it examines the EU’s obligations under the PA and the EU implementing measures regarding the banking sector. It discusses how the activities, tasks, and mandates of the different actors and the related regulatory framework may impact the achievement of the PA objectives. Finally, it proposes measures the EU banking sector may undertake but also points out necessary policy decisions to be adopted by the EU legislators to ensure the EU banking sector’s optimal contribution to achieving the PA objectives.