ECB to decarbonise €344bn corporate bond holdings

ECB President Christine Lagarde

The European Central Bank (ECB) announced it is planning to gradually revamp its €344 billion corporate debt portfolio to favour greener firms.

The ECB said it will “account for climate change in its corporate bond purchases, collateral framework, disclosure requirements and risk management, in line with its climate action plan.”

The central bank said the Eurosystem aims to “gradually decarbonise its corporate bond holdings, on a path aligned with the goals of the Paris Agreement.”

To that end, the Eurosystem “will tilt these holdings towards issuers with better climate performance through the reinvestment of the sizeable redemptions expected over the coming years.”

The ECB said better climate performance “will be measured with reference to lower greenhouse gas emissions, more ambitious carbon reduction targets and better climate-related disclosures.”

ECB board member Isabel Schnabel said: “The eurosystem will gradually decarbonise its corporate bond holdings and this will be done by tilting the sizeable redemptions, which are expected to average over 30 billion euros annually in the coming years …

“Those companies that are the least green today will have to do the bulk of the transition, therefore we said that excluding them altogether is not the right approach.

“We want to give all those companies an incentive to become greener.”

ECB President Christine Lagarde said: “With these decisions we are turning our commitment to fighting climate change into real action.

“Within our mandate, we are taking further concrete steps to incorporate climate change into our monetary policy operations.

“And, as part of our evolving climate agenda, there will be more steps to align our activities with the goals of the Paris Agreement.”