Strengthening the economy through the transition

Germany’s private banks believe strongly that fostering the green transition within the economy is an opportunity to promote new growth and a chance to improve Europe’s ability to compete on the global stage. The Association of German Banks’ position paper “Strengthening the economy through the transition” demonstrates how economic strength, climate mitigation and resilience interact.

“The economic transition is not a matter of cost; it is an investment in the future of Germany as a country and Europe as a Union” said Heiner Herkenhoff, Chief Executive of the Association of German Banks. “Those with the foresight to invest, right now, in clean technologies, energy efficiency and the circular economy are improving their ability to compete on the global stage and strengthening their sovereignty for the future.”

Doing so, he continued, requires a positive view of the future, reliable framework conditions, long-term planning capabilities and effective investment incentives.

In the paper, the Association of German Banks lists three main spheres of action:

1. Provide opportunities by creating reliable framework conditions

Economic and societal actors need to focus on the positive aspects of the transition: it is not just achievable, it offers significant opportunities.

A clear, predictable carbon price is an important instrument for climate change mitigation, innovation and investments. It provides guidance for businesses and creates a level playing field. “We share industry concerns that excessive regulations could cause us to fall behind”, notes Herkenhoff. “But right now, the carbon price is not the main obstacle. Instead, businesses are stymied by uncertainty, unnecessary bureaucracy and the constant flip-flopping within European industrial policy.”

2. Mobilise investments

The transition will require enormous investment. Banks are already financing the necessary changes. To ensure more private capital can support sustainable business practices, we need simple subsidy programmes and clear budgets. Risks must also be spread more equitably.

3. Remove unnecessary bureaucracy, ensure that ESG regulations are efficient and practical

The EU initiatives designed to reduce bureaucracy on all levels are essential. Right now, simplification is the name of the game. In terms of ESG regulations, in particular, it will be important to engage with the financial sector and its needs. Small and mid-sized institutions should be granted proportional relief in terms of their ESG requirements, to ensure that regulations do not hinder innovation and transformation.

“The private banks are committed to their sustainability targets and view themselves as partners to both industry and their retail clients. Sustainability, the ability to compete on the global stage and resilience are all different sides of the same coin and must be viewed as such” according to Herkenhoff. “Clear targets, reliable rules and shrewd policies on subsidies will allow Europe to demonstrate clearly that the green transition and economic success go hand in hand.”

The position paper “Strengthening the economy through the transition” can be viewed here. It was written in collaboration with our member banks and highlights, using both case studies and the results of a survey, how banks have integrated sustainability into their business practices, allowing them to act as partners for their client’s green transitions.

In-depth discussion: bankendialog “Strengthening the economy through the transition” on 3 November 2025 in Berlin.