The European Central Bank announced on Monday that it will be greening its corporate bond portfolio. The regulator is committed to “better climate performance” and therefore opts for decarbonising its investments.
In the coming years, the ECB expects to reinvest a large part of the money that flows back into the treasury. In doing so, an explicit search will be made for green, carbon-free debt paper. Better climate performance will be measured through lower greenhouse gas emissions, more ambitious carbon reduction targets and better climate-related disclosures.
According to the central bank, there are growing concerns about global warming. A United Nations climate change mapping working group recently calculated that the Earth is heading for a temperature increase that could be twice the limit set in the Paris climate agreement.
Meanwhile, the ECB has been repeatedly criticized by environmentalists. that point to the central bank’s interests in polluting companies such as Shell, Eni and TotalEnergies. At the same time, there is an ongoing debate about whether it is appropriate to redefine monetary policy to align it with the fight against climate change.
In Monday’s statement, the ECB said, as always, when buying bonds, it would look at what it would take to achieve the inflation target of 2 percent. “With these decisions, we are turning our pledge to fight climate change into real action,” ECB President Christine Lagarde said in the statement. “Within our mandate, we are taking further concrete steps to integrate climate change into our monetary policy operations. And, as part of our evolving climate agenda, more steps will be taken to align our activities with the goals of the Paris Agreement.”
The ECB had already announced earlier that it was working on sustainability. Separately, the central bank has also conducted a so-called climate stress test among banks, which should show whether lenders sufficiently understand the extent to which global warming will affect their balance sheets. The results of the test will be published on July 8, but the performance will not be broken down by the level of individual banks.