Europe needs a green capital market for investments in clean energy, digital transformation and to meet climate targets, President of the European Central Bank Christine Lagarde said Tuesday.

The pandemic has accelerated pre-existing trends at a pace that we could not have imagined. … Companies have digitized their activities 20-25 times faster than they previously envisioned,” she told in a speech at this year’s Brussels Economic Forum via video conference.

“Call for greener lifestyles has become amazing. … Now 70% of Europeans are in favor of stricter government measures to fight climate change,” she said.

Noting that the EU was trying to preserve the economy during the pandemic, Lagarde said it now needs to focus on transforming it, adding this will require to redirect spending by both public and private sectors towards the green and digital sectors of the future.

“If we leverage, if we capitalize on this moment, the pandemic can accelerate labor productivity growth by around 1 percentage point a year by 2024, more than double the rate achieved after the great financial crisis (in 2008),” she explained.

Lagarde said the Next Generation EU fund, the recovery package to support member states hit by the pandemic, will help channel public investment towards transformative sectors, but also added that it is a lot less clear whether the private financial sector can do the same.

She warned that fragmentation across national financial markets in Europe might actually constrain the ability to finance future investments in sufficient volume.

“We need to see investment around €330 billion [nearly $392.9 billion] every year by 2030 to achieve Europe’s climate and energy targets, and around €125 billion [$148.8 billion] every year to carry out the digital transformation,” she said.

As a solution, Lagarde proposed to match Next Generation EU with what she called a Green Capital Market Union (CMU), “a truly European capital market that focuses on green investments and that transcends national borders.”

She listed three reasons for Green CMU necessity: green capital markets would help the digital transformation of economy, the euro is global currency of green finance, and it has the potential to make rapid progress since it does not face the same challenges as conventional capital markets.

Lagarde argued that specific initiatives under the CMU action plan should be fast-tracked.

“We need proper European supervision of green financial products with official EU seals, such as the forthcoming EU Green Bond Standard. We need harmonized tax treatment of investments in sustainable finance products to prevent green investments fragmenting along national lines,” she also noted.

Copyright 2022 Anadolu Agency. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.