"New Approaches in Transition Finance" as a project run our the Money & Finance" Program in coopération with the Chair "Energie & Prospérité" at Institut Louis Bachelier. It is supported by the Charles-Léopold Mayer Foundation and the European Climate Foundation,
Publications and events linked to this project
Presentation
Conflicts and geopolitical crises serve as a reminder of the need to accelerate the energy transition away from fossil fuel dependency, but the need for massive investment in Europe extends across many other areas: reindustrialisation, climate adaptation, defence, infrastructure, transport… Yet many investments considered strategic are not profitable enough to attract private investors spontaneously; to bridge the gap, the role of "impact finance" remains limited and current banking and financial regulation is not designed to direct financial flows accordingly. All these areas therefore require a variable but significant share of public funding — the latest evaluation report on the France 2030 programme still calls for "a public investment plan in the infrastructure needed for the transition to a low-carbon economy" and for additional support measures for business investment in the decarbonisation of industrial processes.
At the European level, the Savings and Investments Union promises to "unlock" private investment through securitisation and better market integration, without providing instruments to narrow the gap between socio-economic utility and financial profitability, as we analyse in our note « Financing Europe’s Strategic Objectives ».
This role therefore falls to public subsidies financed primarily through debt. Yet the room for manoeuvre of states such as France is increasingly constrained by current debt levels and the rules of the Stability Pact. As for the amounts redistributed within the economy through tools such as the ETS system, carbon taxes or energy savings certificates, they represent an important but wholly insufficient source of financing.
The need to invest in the future on one side, warnings about public debt on the other — the financial equation is a difficult one, and calls for a broader debate on financing tools and costs. This project contributes on three fronts:
– Producing proposals for European and national public decision-makers — on reforms to financial instruments, budgetary rules and governance frameworks needed to genuinely direct financing towards strategic objectives.
– Organising the policy debate bringing together researchers, public decision-makers and financing actors, to compare analyses and circulate proposals across academic, institutional and political circles.
– Making these issues accessible to a non-specialist audience: journalists, civil society organisations, and engaged citizens.
Themes
The programme explores four complementary areas:
– The cost of financing and levers for directing flows towards public objectives. What levers does public authority have to direct financial flows — banking and financial regulation, taxation, central bank refinancing, institutional investors, public development banks?
– The effectiveness of blended finance. Public guarantees, green loans, convertible bonds, equity stakes: how can the real impact of these tools be assessed? Is the sharing of risks and gains from "de-risking" equitable between the public and private sectors? How can mobilised volumes be increased while avoiding the privatisation of benefits and the socialisation of risks? See our note « Financing future investments: a political challenge for Europe ».
– Securitisation as an investment lever. Securitisation lies at the heart of the SIU, but was also central to the great financial crisis of 2007-2008. Is it necessary to finance the real economy? What risks does it pose to financial stability? Does "green" securitisation, with conditionalities on the use of freed-up credit capacity, offer a viable model?
– Prudential regulation and productive financing. Do capital requirements really harm banking competitiveness and the financing of productive investment? Or do better-capitalised banks in fact lend more consistently and prove more resilient? We have contributed to this debate in our response to the European Commission’s consultation on banking regulation and the competitiveness of the EU banking sector, as well as in our analysis of the easing of capital requirements in the United States.
The full list of publications and events related to the programme is available on the Veblen Institute website.