CBM and EIB co-host a conference ‘Financing the transition to a carbon neutral economy’

Last Updated on Tuesday, 6 September, 2022 at 9:07 am by Andre Camilleri

The Central Bank of Malta (CBM) together with the European Investment Bank (EIB) co-hosted a hybrid conference entitled ‘Financing the transition to a carbon neutral economy,’ held on Monday 5 September. The hybrid conference was held at the Central Bank of Malta in Valletta.  

CBM Governor, Professor Edward Scicluna delivered his opening remarks and was followed by an address from the EIB’s Vice-President, Gelsomina Vigliotti who held that “today’s conference, organised together with the Central Bank of Malta, represented a unique opportunity to highlight the investment needs for the country and its businesses to promote a green and sustainable future. As the EU climate bank we stand ready as a trusted partner to support the Maltese economy against the current and future challenges.”

The Minister for the Environment, Energy and Enterprise, Miriam Dalli delivered the keynote speech. In her keynote address, Minister Dalli highlighted the fact that an indispensable element in the decarbonisation of our economy is the stewardship of key financial enablers such as the European Investment Bank and the Central Bank of Malta. This is because the financial industry holds the capital required for this historical transition and we need to ensure that both fiscal and monetary policy are supportive of this capital flow towards green projects and sustainable industries,” said Minister Dalli.

EIB Chief Economist, Debora Revoltella, presented the main results from its 2021 Investment Survey. The survey offers unique insights on the corporate investment landscape, in particular as regards firms’ investment priorities and the constraints they face. The 2021 edition of the survey delves into the massive shock produced by the Covid-19 crisis, and the response and recovery programmes put in place by the European Union and by national governments. The report also assesses the extent to which European firms are addressing the need to make their businesses more green and digital.

EIBIS 2021 shows that on balance fewer Maltese firms invested during 2020. Their outlook towards future investment remained negative, though much less negative compared to EIBIS 2020. As regards climate change, Maltese firms were less likely than the average EU firm to feel the effects of climate change or to have invested in energy efficiency. However, Maltese firms are starting to internalise the risks associated with the transition to net zero, with around 85% either having already carried investment to deal with climate change or planning to do so in the next three years.

CBM experts Joanne Ciantar and Stefan Scerri, from the Financial Stability, Surveillance and Research Department, presented a first assessment of the Maltese financial sector’s direct exposure to economic sectors that may be affected by the transition to a less polluting economy. According to this assessment, the direct exposure of banks and non-banks to such sectors has remained concentrated towards low emission sectors at least since 2016, which indicates that the potential impact from climate-related transition risks are relatively contained. However, operations within such low CO2 emission sectors could induce activity in more polluting sectors, and one cannot thus exclude spillovers on the latter or second-round effects. The impact on the financial sector is expected to be higher if the transition is more abrupt and it is therefore essential that the financial sector takes early steps to manage financial risks related to climate change and incorporate environmental considerations in their activities and risk management practices.

CBM Deputy Governor, Alexander Demarco chaired a panel discussion entitled ‘Getting Fit for 55 – the role of policy and green financing,’ with key stakeholders involved in investment finance, setting greening policies and business transformation. Panellists included Antongiulio Marin, Head of InvestEU Implementation, DG-ECFIN European Commission, Marisa Xuereb, President, The Malta Chamber of Commerce, Enterprise and Industry, Marcel Cassar, Chair, Malta Bankers’ Association and Gilles Badot, Director Adriatic Sea Department, European Investment Bank.

Commenting on the conference, Governor Scicluna stated how “over the next years, regulatory authorities will be introducing the appropriate incentives in financial services regulations so that the flow of credit towards achieving a climate neutral society takes priority. However, a lot will need to be done by financial institutions and by non-financial corporations themselves.”

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