Lagarde criticised for response to climate risk concerns

April 11, 2021|Written by Camilla Schramek|European Central Bank

Christine Lagarde, president of the European Central Bank (ECB), has been criticised for her response to concerns raised by MEPs about climate risk and carbon bias in the bank’s corporate asset purchases.

Reclaim Finance, a think tank and NGO focusing on financial institutions and the climate crisis, said that Lagarde’s response “struggled to cover over the ECB’s inaction” and accused Lagarde of “deflecting MEPs’ call to act on climate.”

While the ECB president highlights the bank’s work on climate risks, the group said, she is ignoring the bank’s carbon bias in its asset purchases and collateral framework.

A cross-party group of MEPs, including Pascal Canfin, chair of the European Parliament’s environmental committee, asked the ECB to analyse the climate-related financial risks in its monetary policy framework and publish the results. The request was submitted via a written question under the Rules of Procedure of the European Parliament.

In her reply Lagarde warned that climate change “may affect our economy in ways that could pose a severe threat to price and financial stability in the medium and long term,” and that “this will require us to adapt our risk management frameworks.”

However, according to Reclaim Finance she said nothing of detail, pointing only to the agreement among the Eurosystem central banks to report and disclose climate-related risks in their own funds portfolios, with the exception of monetary policy portfolios.

Following studies outlining bias towards carbon-intensive sectors in the ECB’s monetary policy asset purchases and collateral framework, Reclaim Finance and other climate groups have called for the bank to exclude these companies from its operations. They point out that a “sustainability linked” credit facility similar to that of the ECB’s will finance a new tar sands pipeline project.

“Lagarde focuses on [ECB] purchases of supposedly ‘green’ or ‘sustainable’ assets,” says the Reclaim Finance critique, “but forgets that its asset purchases and collateral framework are both skewed toward carbon intensive activities.”

Reclaim Finance recommends that the ECB instead adopt a precautionary approach and actively contribute to mitigating climate change, especially considering the radical uncertainty which characterises climate risk.

This page was last updated September 15, 2021

Share this article