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MALTATODAY 21 November 2021

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14 NEWS maltatoday | SUNDAY • 21 NOVEMBER 2021 Carbon tax means losses for banks and insurance: MFSA NICOLE MEILAK BANKS, insurance compa- nies and investment funds could face losses if a global tax on carbon is introduced, but would still be likely to recover quickly, a study from Malta's financial regulator says. Giorgia Conte and Frances- co Meglio, analysts at the MF- SA, sought out to study the short-term implications of a carbon tax on the investment portfolios of the Maltese fi- nancial system. Overall, the study finds that a carbon tax would lead to limited losses because the na- ture of the investments made by most financial corpora- tions can withstand its effect. However, a few sectors could experience noteworthy losses, such investment funds, most- ly non-domestic funds, that could suffer material losses. The study refers to two life insurance companies which could be influenced by the in- troduction of a moderate car- bon tax rate. The bottom line is that mod- erate climate policies such as a carbon tax could have minor consequences on the Maltese financial system. However, the study was only concerned with the investment porto- lio of financial corporations. Other assets such as corpo- rations' loan portfolios, could yield different results. In fact, a stress-test carried out by the European Central Bank pointed out that Maltese banks are among the most exposed in the Eurozone to firms at high physical risk to climate change due to flood- ing or wildfire. Climate risk affects banks through the loans they give out: when they lend money to firms, that firm could experi- ence climate-related damage that renders them unable to pay back their loan. The risks are categorised into "transi- tional" and "physical" risks. Physical risk concerns tangible damage to a company's prop- erty or capital as a direct result of climate-related catastrophe or disruption to the firm's production chain; transition risks are all the risks arising from the transition to carbon neutrality such as rising car- bon costs as governments pe- nalise carbon use, and chang- ing demand for goods that are more eco-friendly. But research in this area is a challenge. There is a lack of reliable, consistent, and de- tailed data to help quantify climate change. Another obstacle is the un- certainty that characterises climate change. No seasoned meteorologist can predict the weather patterns of five years' time, rendering it a challenge to study long-term financial scenarios. But studying shorter-term climate risks helps establish how resilient or vulnerable a company's operations are to climate damage. The MFSA researchers an- alysed six carbon tax policy scenarios and estimated the losses in equities, bonds, and holdings in collective invest- ment schemes (CIS) to deter- mine resilience. Equities would incur the highest losses with the in- troduction of a carbon tax, followed by losses in collec- tive investment schemes and bonds. The main sources of transi- tion risk for Maltese financial entities were found to be from manufacturers of non-metal- lic metal products, CIS, and suppliers of electricity, gas, steam, and air conditioning. These suppliers, together with suppliers of water, sewerage, waste management and reme- diation activities, presented larger-than-average losses. Paceville's listed buildings: Heritage watchdog agrees with overhead storeys JAMES DEBONO A planning decision could set a precedent that adds extra storeys on Grade 2 scheduled buildings in Malta and Gozo. The Superintendence for Cultur- al Heritage has given its blessing to an application to add an addition- al three floors on an entire row of listed buildings in Wilga Street in Paceville, provided that the extra floors are receded. As proposed, the application seeks to raise the building height of the exist- ing scheduled townhouses in "a uniform architectural vocabu- lary reaching the adjacent blank third-party walls". The two-storey, early 20th cen- tury townhouses are scheduled at Grade 2 because of their archi- tectural and historical value. This scheduling normally precludes demolition or significant altera- tions to the buildings. But in its submissions on this particular application the SCH said that "prima facie" it is in agreement with the proposed ap- plication and the proposed addi- tional facades, "provided that the newly proposed structures above the existing roof level are receded in order to protect the visual in- tegrity of the existing scheduled structures". While recommending extra floors on the townhouses, the SCH described the buildings as being of "significant cultural her- itage value" because "they are built with an architectural rhythm that correlate with each other in this surviving significantly legible streetscape". Originally, resident Priscilla Calleja requested the addition of two floors to transform her prop- erty into a guesthouse back in 2017, but it was recommended for refusal following the objection of the Superintendence for Cultural Heritage. In 2018, Planning Authority chairperson Johann Buttigieg pro- posed an outline application to be instead submitted for the whole stretch of scheduled properties, to determine the building height and external appearance, and avoid piecemeal development. Buttigieg noted that the outline application will cover an area well beyond the applicant's property and will act as a master plan for the whole area. Now Calleja has applied to add three new floors on all townhouses, declaring she was not the owner of the entire site but that other owners had been in- formed and granted consent. In 2017 the Superintendence for Cultural Heritage had warned that the proposed increase in height will alter the façade of the sched- uled property, with a consequent impact on the streetscape and on the adjacent scheduled properties. The latest solution would remove the impact on adjacent properties but would still alter the façade of the property. Planners are viewing the appli- cation as a test case for similar developments across Malta and Gozo, which could see similar at- tempts to avoid blank party walls by roping owners of entire rows of scheduled buildings. But this could result in a drastic architec- tural change, which could erode the heritage value of these build- ings. The case once again exposes a gap in planning legislation which fails to clearly state what kind of development can be allowed on listed buildings. The study finds that a carbon tax would lead to limited losses because the nature of the investments made by most financial corporations can withstand its effect.

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