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Article

Green Mortgages, EU Taxonomy and Environment Risk Weighted Assets: A Key Link for the Transition

1
Bank of Italy Milan Branch, 20121 Milan, Italy
2
Economic Policy Department, Università Cattolica del Sacro Cuore, 20123 Milan, Italy
3
Ricerca sul Sistema Energetico SpA, 20134 Milan, Italy
*
Author to whom correspondence should be addressed.
Academic Editors: Baojie He, Jun Yang, Ayyoob Sharifi and Chi Feng
Sustainability 2022, 14(3), 1633; https://doi.org/10.3390/su14031633
Received: 22 December 2021 / Revised: 27 January 2022 / Accepted: 28 January 2022 / Published: 30 January 2022
(This article belongs to the Topic Climate Change and Environmental Sustainability)
The need for a quick and radical green transition gives a key role to the financial system as the main source to fund the change. This debate also involves the development of banking regulation tools able to serve the transition. Building on previous works, we propose a method to weight banks’ assets that combines conventional financial risks and environmental risks to calculate prudential capital requirements, and we apply it to the EU Taxonomy’s technical screening criteria to build an environmental risk indicator based on the buildings’ energy consumptions. We show how to calculate the tool endogenously for the taxonomy sections related to buildings (new construction, purchase of building, renovation), thus proving its immediate enforceability, using data from the Lombardy’s housing stocks. Finally, we conduct a stress test for the Italian banking system showing that our proposal would be an effective incentive for the banks to fund the green transition of the construction sector. Disclaimer: The views expressed are those of the authors and do not involve the responsibility of the Bank of Italy or RSE. View Full-Text
Keywords: climate change; prudential regulation; sustainable finance; EU Taxonomy; green mortgage climate change; prudential regulation; sustainable finance; EU Taxonomy; green mortgage
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MDPI and ACS Style

Esposito, L.; Mastromatteo, G.; Molocchi, A.; Brambilla, P.C.; Carvalho, M.L.; Girardi, P.; Marmiroli, B.; Mela, G. Green Mortgages, EU Taxonomy and Environment Risk Weighted Assets: A Key Link for the Transition. Sustainability 2022, 14, 1633. https://doi.org/10.3390/su14031633

AMA Style

Esposito L, Mastromatteo G, Molocchi A, Brambilla PC, Carvalho ML, Girardi P, Marmiroli B, Mela G. Green Mortgages, EU Taxonomy and Environment Risk Weighted Assets: A Key Link for the Transition. Sustainability. 2022; 14(3):1633. https://doi.org/10.3390/su14031633

Chicago/Turabian Style

Esposito, Lorenzo, Giuseppe Mastromatteo, Andrea Molocchi, Paola Cristina Brambilla, Maria Leonor Carvalho, Pierpaolo Girardi, Benedetta Marmiroli, and Giulio Mela. 2022. "Green Mortgages, EU Taxonomy and Environment Risk Weighted Assets: A Key Link for the Transition" Sustainability 14, no. 3: 1633. https://doi.org/10.3390/su14031633

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