UBS Boss Ermotti Says Banks Are Not the ‘Climate Police’

(Bloomberg) — UBS Group AG Chief Executive Officer Sergio Ermotti said policymakers shouldn’t rely on banks as a de facto ‘climate police’ and should themselves provide the appropriate incentives for companies to decarbonize.

The net zero transition “implies very difficult trade-offs” that will require the right balance be struck between government action and market-led incentives, Ermotti said via video link at a conference in Lugano, Switzerland on Thursday hosted by an association of Swiss sustainable finance professionals. Unfortunately, the financial sector “is an attractive target for policymakers” that wish to “divert at least some of the blame of unpopular decisions to banks,” Ermotti said.

The comments, which echo statements Ermotti made in Davos, when he warned against over-zealous regulators who may want to dictate how lenders pursue the transition to a carbon neutral economy, arguing that broader legitimation is needed first. It should be the responsibility of governments to decide what assets and activities should be labeled green or brown, not central banks or supervisory authorities, he said on Thursday.

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“Banks should not be forced to take decisions on behalf of policymakers: We are part of the private sector and we need to represent and protect the interest of our diversified clients,” he said. “While we are not comfortable taking on the role of standard setters for all economic actors or the climate police on behalf of authorities, we are confident in our duties as financial risk managers.”

The event in Lugano was focused on the role of carbon markets in the low-carbon transition. Ermotti said carbon credits can provide “an incremental revenue generated mechanism that incentivizes investments into both nature-based and technology-based solutions that directly help remove emissions from the atmosphere.”

 

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