ECB unveils plan on pro-climate investments



The Manila Times

Foreign Business

FRANKFURT, Germany: The European Central Bank (ECB) on Monday unveiled plans to integrate climate change into its monetary policy in a bid to encourage eurozone businesses to pay more attention to their environmental impact. The steps by the ECB’s governing council “aim to better take into account climate-related financial risk” and “support the green transition of the economy in line with the EU’s (European Union) climate-neutrality objectives,” the central bank said in a statement. Under the new plans, the ECB said it would aim to “gradually decarbonize corporate bond holdings” from October 2022, shifting them toward issuers with better climate performance. This will be measured through indicators such as lower greenhouse gas emissions, more ambitious carbon reduction targets and better climaterelated disclosures, it added. The ECB’s portfolio of asset purchases worth about 350 billion euros ($365 billion) is currently heavily weighted toward big polluters. The central bank said it would aim to “tilt these holdings toward issuers with better climate performance” as it reinvests about 30 billion euros a year. The aim is to “give companies more incentives to reduce their emissions,” Isabel Schnabel, a member of the ECB’s executive board, told a press briefing. However, “no company will be entirely excluded from the portfolio,” she added. By the end of 2024, there will also be limits on the share of assets issued by entities with a high carbon footprint that can be pledged as collateral by individual counterparties when borrowing from central banks. At first, banks will apply such limits only to marketable debt instruments issued by companies outside the financial sector, the ECB said. Assets will also have to comply with the Sustainability Reporting Directive (SRD). However, the implementation of the SRD, which is set to apply to about 50,000 companies in the European Union, has been delayed, with eligibility criteria not kicking in until 2026. The concept of “green” ECB loans to banks to finance sustainable projects, championed by President Christine Lagarde, remains absent from the catalogue of new measures.