From October, the Frankfurt institution will apply environmental criteria in its action on the markets. An important signal for the entire financial sector.
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The European Central Bank (ECB) announced, on Monday, July 4, the start of an important environmental turning point, by introducing green criteria in part of its operations. If the complete implementation of the measures will take years, they should have repercussions throughout the financial system. Christine Lagarde, the president of the ECB, launched the site shortly after her taking office, at the end of 2019. At the time, the subject was still largely taboo in the very conservative world of the central bankers. Part of them were concerned to see the central bank leaving its official mandate, namely ensuring price stability.
In July 2021, the president nevertheless acquired the case gain on the principle: within the framework of her great strategic revision, the Frankfurt Institute promised “to integrate considerations of climate change in [its] monetary policy” . This Monday’s announcement is the first concrete translation of this promise. “With these decisions, we transform our commitment to fighting climate change into real actions,” says M me lagarde. “It is progressing! The role of the ECB for the ecological transition is essential!” Reacted the European deputy Aurore Lalucq, from the Place Public Party. “It’s positive, but it’s very slow,” puts Stanislas Jourdan, from the Positive Money Association.
The action of the ECB will be done in three steps. From October, it will modify its criteria for purchasing business bonds. Because the monetary institution is very active in the financial markets: since 2015, it has bought titles there to support the economy. In total, it acquired it for almost 5,000 billion euros, in their immense majority of state debts. A small part, for 344 billion euros, is made up of business debts. The problem is that the composition of these purchases reflects the panorama of the companies present on the markets, and that a good part of them are very polluting.
incomplete advances
A 2019 study, published by the Veblen Institute, estimates that 63 % of business bonds purchased by the ECB came from the most emitting greenhouse gas sectors: production and distribution of fossil fuels, automotive sector, electricity production … Now, the ECB announces that it will “switch” its bond portfolio to companies with “better climate performance”. It will judge them according to three criteria: the level of emissions of co 2 , the objectives of reduction of emissions and the transparency with which the company reveals its carbon footprint.
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