5. Role Of The Public Sector
It can also play an important role in the development of pre-competitive and non-competitive structures, for example, in order to support the implementation of approaches to actions wherever a market solution does not take hold independently due to a lack of incentives.
The public sector is understood to include all players tasked with executive functions, for example: ministries and subordinate authorities at the federal and state level in Germany, development institutions/banks, other financial market players with a public service remit such as the state banks and the savings bank sector, public insurers, stock exchanges and export credit insurers, Deutsche Bundesbank etc. Public sector players are not a homogeneous group, but instead operate in part on the basis of very different parameters. Among other things this concerns the legal and supervisory requirements imposed on public-law entities. This fact must be considered in the approaches to action.
Finally, the public sector is expected to align its budgetary policies consistently with its political goals. Challenges It is a challenge for the public sector to enhance its own awareness of its leading role and to consistently live up to its position as a role model domestically, on the European and international political stage as well as in the global market. Germany’s federal structure must also be taken into account. Approaches to action
Aside from its role as a shaper of the supervisory framework and the incentive systems, the public sector in its capacity as a buyer, funder and financial market player has a key role serving as a role model for the transformation of the financial and economic system. Without intervening in the market via regulations, the public sector’s impact can be significant on account of the signalling effect its actions have on other financial market players, for example, in relation to the implementation of the carbon neutrality target by 2050. The public sector can leverage this effect by consistently pursuing big ambitions in its actions. The precondition is a well-developed understanding whether its own actions are consistent with its political goals. Relative to the afore-said political goals, so far, the public sector has made use of its role only to a limited extent.
1. Public sector players are called upon to link the allocation of funds consistently and strictly to its political goals. The necessary standards, regulations and transparency requirements should be based on international practice, but could be refined where necessary. This principle should also guide negotiations on the EU’s multiannual financial framework.
2. In its capacity as an investor, the public sector is one of Germany’s largest institutional investors. It should strictly align its capital expenditures – e.g. in connection with the “Fund for Financing the Management of Radioactive Waste” (KENFO) – with given political goals and should abide by sophisticated sustainability benchmarks (such as the “Climate Transition Benchmark” or the “Paris-aligned Benchmark”) prepared by the EU Commission’s Technical Expert Group (TEG). The public sector should be a pioneer in the
Additionally, the public sector is often in a position enabling it to put in place specific management and incentive systems for itself which private sector financial institutions cannot realise to quite the same extent. This allows it to take on the role of trailblazer.
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