The EU has been a driver of sustainability and ESG for many years. The financial sector, in particular, is being held accountable. With the re-election of Ursula von der Leyen as President of the EU Commission in mid-July, the aim is to implement further and develop the European Green Deal.

The prominent role of the banks is unlikely to change. However, Jörg Eigendorf, Chief Sustainability Officer (CSO) at Deutsche Bank, warns against overestimating the position of the banking sector. „We have a special role, but it is not as big as the one that is often attributed to us,“ says Eigendorf, who joined Deutsche Bank from journalism in 2016. He was responsible for communication and sustainability for six years. Since 2022, he has worked exclusively as CSO.

In Eigendorf's view, ESG regulation should not be the only measure to achieve climate targets. „In my view, there is a simple instrument to promote sustainability, and that is pricing – it is the most important signal in an economy", he says.

It will not be enough just to indirectly encourage companies to take more sustainable measures through more expensive financing. That may be a factor, but the cost of credit is just one of many cost factors. If, on the other hand, politicians were to ensure that the CO2 price is raised, this would have an enormous and much more direct effect. Companies think in terms of marginal costs, so the CO2 price is a significant lever.

For the ESG manager, a higher carbon price must give companies a solid incentive to use less oil and gas, and switch to renewable energy. „Otherwise, energy prices will not reflect the true cost of environmental destruction, and it will take far too long for renewables to become established.“

Brussels is exerting more and more influence on business in the financial sector. „As a bank, we aim to make sustainable decisions,“ says Eigendorf. However, he also points out that many factors go into a lending decision. „It is quite possible that we will no longer grant loans to companies that do not operate sustainably, and where the joint dialogue remains unsuccessful.“

However, ending the customer relationship can only ever be a last resort. „As a bank, we don't wag a finger at our customers; we want to support them in their transformation.“

It is also unrealistic to believe that oil and gas companies will no longer receive financing in the face of increasingly strict ESG regulation. „They will continue to receive funding from market participants – and in cases of doubt, from market participants that are not so strictly regulated,“ says Eigendorf.

„What we are currently experiencing is a historic transformation, comparable to the industrial revolution," he says. "We have to transform ourselves in a very short space of time, and this will not succeed without a regulatory framework.“

But he once more emphasises that banks can be an important lever, but they will not transform the economy. The financial sector is just one instrument in a complex transformation process.

Sustainability and transformation also bring with them opportunities. „Sustainability is often associated with costs and regulation – it's actually about rectifying a market failure and utilising the opportunities that can arise from this", he says. The topic is on everyone's mind, and you can no longer risk ignoring it.

In his view, companies should be careful when using the term climate-neutral, since this is a complex area in communications, and has become even more challenging given the current guidelines at EU level, as well as domestic law in Germany. It remains a highly complex task to prove that a product is environmentally sound.

The ESG expert is less than convinced by the EU taxonomy, which he views as highly complex and challenging. „Self-regulation works better in some cases, because it is usually principle-orientated and simpler," he says. "The taxonomy is very detailed and prescribes a lot of things, which leads to an enormous amount of work.“