ECB’s Nagel: Robust Banking System Essential to Achieve Greenhouse Gas Neutrality

13 February 2025

By Marta Vilar – GLASGOW, Scotland (Econostream) – European Central Bank Governing Council member Joachim Nagel said on Thursday that having a solid banking system was paramount in order to achieve greenhouse gas neutrality.

In a speech at the Adam Smith Business School University of Glasgow, Nagel, who heads the Deutsche Bundesbank, said that he was ‘confident that our financial system can mobilise the necessary financing’ to meet energy transition targets.

The additional cost to achieve such goals should rely on internal financing, but also on loans from the financial system and instruments like debt securities, according to Nagel.

‘In terms of external financing, bank loans might play the largest role’, he said. ‘They account for over one-quarter of the estimated financing mix.’

A solid banking system was crucial to meeting climate goals, he said.

‘However, we also need to improve access to alternative financing sources’, he said. ‘Non-financial firms, in particular, would greatly benefit from better capital market financing.’

Governments could lower the additional cost of achieving greenhouse gas neutrality by ensuring that the steps needed are planned rigorously and with a long term perspective, he said.