Climate protesters target Bundesbank over market neutrality

Bundesbank President Jens Weidmann was the target of a climate protest in Frankfurt today highlighting the consequences of his position on market neutrality. The protest took place as the European Central Bank (ECB) debated the introduction of carbon emissions into the eligibility criteria of its asset purchases, collateral framework and lending operations, which Weidmann opposes.

Protestors from the climate campaign group Koala Kollectiv awarded the Bundesbank a smoking trophy as a prize for “best climate killer” in a mock ceremony.

The ECB currently conducts monetary policy under the principle of so-called market neutrality, in which support is given to companies in proportion to their past market activity. Critics say this locks in funding for fossil fuel and high-emission companies, skewing ECB support towards activities contributing the most to climate change. A series of studies has shown a substantial bias towards high-carbon companies and sectors in the ECB’s corporate QE portfolio and collateral framework.

ECB President Christine Legarde, board members Isabel Schnabel and Frank Elderson, and several Eurosystem central bank heads have expressed support for abandoning or altering the market neutrality principle to allow for climate-related criteria in monetary policy.

However, Weidmann and the Bundesbank have been strongly opposed, arguing that climate risk disclosure is sufficient action and going beyond this threatens ECB independence. All Eurosystem central bank heads are voting members of the ECB’s decision-making governing council.

“Mr Weidmann prefers cementing a status quo that favours climate-destroying sectors, like fossil fuels,” Rika von Gierke, KoalaKollektiv spokesperson, said in a press release accompanying today’s protest. “We demand that the Bundesbank supports effective climate protection measures in the ECB’s governing council.”

Responding to the protest, Reclaim Finance campaigner Paul Schreiber was also critical of Bundesbank opposition to ECB climate action.

“The ECB must at least adopt a precautionary approach to climate risks by aligning on EU objectives to mitigate climate change,” he said, highlighting the difficulties in precisely assessing uncertain climate risk. “Jens Weidmann maintains the illusion that we can have perfect knowledge of climate risks and that, once we do, the market will solve everything.”

Following today’s action, Weidmann responded to Reclaim Finance with a letter disputing carbon bias in ECB asset purchases and reiterating his opposition to the introduction of climate-related criteria into monetary policy. “Monetary policy can only achieve its primary mandate when it is credible,” he wrote. “The credibility of central banks rests on several factors, one of the most important of which is financial independence.”

Today’s protest is the latest in a series of recent protests targeting European central banks over their support for activities causing climate change. Meanwhile a petition calling on the ECB to “stop funding the climate crisis” has attracted almost 170,000 signatures.