The Green Asset Ratio (GAR) - a new KPI for credit institutions

Volker Brühl

No 683, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: The financial sector plays an important role in financing the green transformation. Various regulatory initiatives in the EU aim to improve transparency in relation to the sustainability of financial products and the sustainability of economic activities of non-financial and financial undertakings. For credit institutions, the Green Asset Ratio (GAR) has been established by the European regulatory authorities as a KPI for measuring the proportion of Taxonomy-aligned on-balance-sheet exposure in relation to the total assets. The breakdown of the total GAR by type of counterparty, environmental objective and type of asset provides in-depth information about the sustainability profile of a credit institution. This information, which has not been available to date, may also initiate discussions between management and shareholders or other stakeholders regarding the future sustainability strategy of credit institutions. This paper provides an overview of the regulatory background and the method of calculating the GAR along different dimensions. Finally, the potential benefits and limitations of the GAR are discussed.

JEL-codes: G10 G20 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-ban, nep-eec and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:683

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