Could the Euro support the EU sustainability ambitions?
Agnieszka Smoleńska, PhD has investigated the extent to which the advent of responsible finance can more broadly change the nature of money in her paper "The Euro as currency of the EU green transition".
She assesses how the Euro helps build the governance framework of the EU's transition projects from a political and a legal point of view. Her observations outline a set of opportunities to make the Euro the currency of the green transition:
- 800 B€ of green bonds have been issued since 2022, making it the most used currency worldwide, accounting for 42% of the global total (30% for the dollar).
- The European Central Bank is the first institution to have issued green bonds back in 2007 and has since made Europe a global leader in the issuance of purpose-led sovereign debt.
- The EU regulatory framework regarding sustainable finance is spearheading the definition of sustainable investment, green bonds and responsible monetary policies, making the Euro a leader in the field.
- The significant issuance of EU green debt alongside substantial private capital allocated to sustainable investment help drive the Euro towards sustainable projects.
- The very constitution of the Euro is increasingly leaning towards sustainability, with the issuance of public debt with specific long-term purpose and legal frameworks governing the relationships between the private actors creating money for responsible projects.
Even though the EU is in an unprecedented position to make their currency a tool to support environmental and social objectives, such endeavour does not come without risks and obstacles: greenwashing, technocratic policies, outsized role given to private actors...