CIVICA Experts in the Spotlight highlights the research and expertise of academics across our alliance. In this edition, Beny Saputra, SJD candidate and PhD Researcher at the Department of Legal Studies at Central European University (CEU), explores how European banks can use lending decisions to address environmental risks, arguing that green finance should go beyond transparency to help prevent environmental harm and support nature conservation.
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Here is a number that stuck with me. Between 2016 and early 2023, financial institutions based in the EU provided roughly EUR 256 billion in credit to major corporate groups in sectors linked to environmental harm. According to a report by Greenpeace, Harvest, and Milieudefensie, that is 22.1 percent of the global credit they identified. Meanwhile, Europe has been busy building one of the most ambitious sustainable finance frameworks in the world. Both things are true at the same time, and I think the reason why is worth understanding.
First, what is green finance?
Green finance means using the financial system to support activity that is good for the environment, and to manage the risks that environmental damage creates for the economy. In the EU, it stands on a few main pillars. The Taxonomy is a classification system that says which activities count as sustainable. Disclosure rules require companies and financial firms to report how they affect nature and how nature affects them. Supervisors also expect banks to manage climate and environmental risks inside their own governance.
The usual story is that more transparency will fix the problem. Experts in this field see something different. These rules are mostly designed to make harm visible. They do not tell a bank when to say no.
Knowing is not the same as acting
Picture a European bank considering a loan to a company whose supply chain involves clearing land in a region rich in biodiversity. Under today’s rules, the bank can disclose its exposure, classify part of its portfolio, and flag the risk in its ESG reporting. Not one of those steps forces it to ask, in a structured way, whether the loan should go ahead. The concern is on the table, but it does not decide anything.
That is where my research begins. A bank can hold better data than ever and still approve the loan on standard terms. In this study, I describe it as a framework that is better at tracing harmful money than at stopping it.
The idea: credit is never neutral
A loan is more than money changing hands. It helps decide which activities become possible, which ones can grow, and which ones can last. So when a bank approves, prices, monitors, or refuses financing, it is shaping what happens in the real economy. This is why I call the idea credit as conservation policy.
I should be clear about what it does not mean. It does not mean every environmental concern ends in a refusal, and it does not turn banks into environmental police. It means the lending decision becomes a legal moment where environmental concerns can change the outcome, through conditions, closer review, or in serious cases a refusal.
Why “ex ante” matters
I use one of the famous law to address economic issue, which is Ex-Ante. It is Latin for “before the event.” An ex ante approach acts before harm happens, while an ex post approach acts afterward, through fines, lawsuits, or public anger. For nature, timing is everything. A cleared forest does not grow back on a legal schedule, and money already released is very hard to call back. The moment before approval and payout is one of the few times a lender really has leverage.
What it could look like
Banks already do something similar in another field. To fight financial crime, they screen transactions, rate risks, escalate suspicious cases, and sometimes stop a payment before it goes through. This study borrows that preventive logic for environmental harm. In practice, the toolkit looks like this:
Screen every credit request for red flags, such as sensitive locations or links to deforestation.
Classify the risk as low, medium, high, or unacceptable.
Match the depth of due diligence to the level of risk.
Decide among four outcomes: approve, approve with conditions, escalate, or refuse.
Confirm that conditions are met before money is released, then keep monitoring.
Write down the reasons so every decision can be reviewed.
None of this is wild invention. The Equator Principles, adopted by over 130 financial institutions, already apply a similar approach to project finance. The toolkit simply stretches that thinking to everyday corporate lending.
Power needs limits
The power to say no must come with guardrails. Without clear criteria, lenders could act arbitrarily, and some firms or communities could be shut out of finance in ways that are too blunt. So decisions should rest on structured indicators, stay proportionate, and be open to review. A bank should be able to explain its reasoning, and the people affected should be able to challenge it.
Why you should care
The encouraging part is that the EU does not need to start from zero. The Taxonomy, supervisory guidelines, and due diligence rules already hold many of the building blocks. What is missing is a way to connect them at the moment money moves.
This matters well beyond Europe’s borders. Many of the ecosystems touched by European credit sit far from here, while the decisions behind that credit are made in bank offices close to home. We already know a lot about environmental harm. The harder question is what lenders should do with that knowledge before they lend.
About the Author
Beny Saputra is an SJD candidate/PhD Researcher at the Department of Legal Studies, Central European University (CEU) in Vienna, Austria. He is currently also lecture in the American University of Central Asia (AUCA) and Visiting researcher in the faculty of law Comenius University, Slovakia. His research focus at how law and governance shape finance and emerging technology (e.g. AI, blockchain), including sustainable finance, Capital market and securities regulations, and corporate finance. Before academia, he spent a decade working as a banker in various bank based in Jakarta, Singapore, Dubai and Hungary.
The full study behind this article is published as Chapter 12, “Credit as a Conservation Policy in EU Green Finance,” in Governance, Environment and Democracy at the Crossroads: The EU Economy and Society in the 21st Century, edited by Piotr Maszczyk, Mariusz Próchniak, and Małgorzata Znoykowicz-Wierzbicka (SGH Publishing House, Warsaw, 2026).
