Ten years ago, the Paris Climate Agreement was signed with the goal of limiting global warming to 1.5 degrees Celsius. As things stand today, this target will not be achieved. But how can the transition be advanced? The role capital markets play in this process also depends on how much longer carbon-intensive business models remain profitable.
Ralf Eckert, Managing Partner Financial Services at EY Germany; Dirk Schumacher, Chief Economist at the Credit Institute for Reconstruction (“Kreditanstalt für Wiederaufbau”, KfW); and Florian Heeb, Assistant Professor at SAFE and UniCredit Foundation Fellow, discussed the role of capital markets in driving the transition at a panel discussion on 19 June 2026. The discussion was moderated by Detlef Fechtner, Chief Political Correspondent at Börsen-Zeitung. The Sustainability Office of Goethe University Frankfurt, the House of Finance, and SAFE organized the event.
From reporting to transition
Sustainability regulations such as the EU Corporate Sustainability Reporting Directive and the EU Taxonomy are important and create transparency, but they do not lead to transformation, the experts emphasized. At the same time, according to Schumacher, the reporting requirements place a particular burden on small and medium-sized enterprises. “I’m torn between two worlds,” he said.
Another important aspect is the quality and comparability of data in sustainability reporting. Heeb highlighted that standardization is difficult due to industry-specific differences. Measuring sustainability aspects other than CO₂ emissions is also particularly challenging: measuring a company’s impact on biodiversity, for example, is about 80 times more complex.
From brown to green investments – but how?
For the financial market to play a stronger role in driving the transition, it must be clear where capital is lacking and where it can have the greatest impact. However, such a targeted analysis is “not that easy” in practice, Heeb said, but it would be enormously helpful: Many investors are willing to deploy capital specifically to support the green transition, even if this might mean lower financial returns.
It remains to be seen how capital flows might change as a result of the transition. Heeb mentioned academic research indicating that CO₂-intensive (“brown”) assets are increasingly being shifted from strictly regulated banks to less regulated financial intermediaries, such as non-banks. A crucial question, therefore, is how much longer CO₂-intensive business models remain profitable. A well-designed emissions trading system could send strong price signals by pricing CO₂ emissions, thereby making emissions-intensive business models less economically attractive.
