The ECB appears to be less climate-friendly than assumed.
(Photo: dpa)
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Frankfurt According to a study, the ECB prefers climate sinners among companies with its rules for loan collateral for financial institutions. Around 59 percent of the corporate bonds that the ECB accepts from banks as pledges came from carbon-intensive companies, according to a study published on Wednesday by the environmental protection organization Greenpeace, the New Economic Foundation (NEF) think tank and SOAS University of London University of the West of England and the University of Greenwich.
However, the companies only contribute 29 percent of the gross added value in the EU. The ECB rules were inconsistent with the Paris climate targets and the European Union’s “Green Deal”.
“Ironically, the European Central Bank, as an influential signal generator for the financial world, is setting the wrong incentives and favoring climate offenders,” criticizes Greenpeace finance expert Mauricio Vargas. The study also comes to the conclusion that the European Central Bank (ECB) classifies bonds from high-carbon industries as less risky compared to other stocks. The haircuts on such securities as collateral were on average lower than for bonds from other branches of industry.
The authors also present three possible solutions for a reform. “Under our scenarios, banks with a ‘dirtier’ portfolio of corporate bonds would have to switch to ‘greener’ bonds and climate practices to ensure smooth access to central bank credit,” they write.
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One suggestion is that depending on the harmfulness to the climate, the discounts on the collateral are increased. Two tougher proposals aim to ensure that banks can only bring in bonds from climate sinners to a certain extent, or no longer at all, as collateral for ECB loans.
The issue of climate change is currently very popular with the ECB. Central bank president Christine Lagarde has made it clear that the ECB should play a more active role in the fight against climate change in the future. The question of a “greener” monetary policy also plays a major role in the ongoing strategy review of the ECB. However, there have recently been different views among the monetary authorities as to how far the central bank should go. The results of the strategy check are to be presented in September.
More: The ECB bundles internal forces in the fight against climate change. Bundesbank President Weidmann, however, warns against too high expectations of the central banks.
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