This week is marked by the early announcement of the ECB’s strategic review which laid out an action plan to incorporate climate change into the bank’s monetary policy. The review process has taken 18 months and been influenced by many civil society organisations. We dedicate this week’s round-up to the reactions of some of those organisations.
To read more about the announcement itself please go here.
New Economics Foundation
The review conclusions are a landmark moment, with the ECB’s decision making-body – the governing cuncil – formally recognising the central bank’s responsibility to act on climate change within its mandate, and outlining a roadmap of actions the ECB is planning to take. The symbolic importance of this shift in their approach to monetary policy is huge – but the outlined roadmap fails to address some of the major asks put forward by the New Economics Foundation (NEF) and partners, and the timeline of action needs to be sped up in recognition of the urgency of the climate emergency.
NEF laid out a progress check based on the civil society asks:
- On corporate asset purchases and collateral framework: The ECB acknowledged that its asset purchase programmes (quantitative easing or QE) are climate-misaligned, and announced it will begin to adjust the scheme to include climate change considerations. It is welcome that the ECB will require issuers to be aligned with the Paris Agreement, and will begin to disclose the climate impacts of the Corporate Sector Purchase Programme (CSPP), as well as committing to consider climate risks in its collateral framework valuations. However, it appears the ECB will take no action on excluding the dirtiest issuers and assets from the scheme, and the language leaves scope for the measures to be watered down.
- On refinancing operations: The major failing of the review is the lack of any move to green the ECB’s large refinancing operations (Targeted Longer-Term Refinancing Operations or TLTROs). The ECB must both (a) decarbonise its existing programmes of cheap lending to banks and (b) move ahead with an ambitious ‘green’ TLTRO, providing cheap credit for essential investments needed for the green transition.
- On supporting sustainable investments: the announcement offers little promise of the ECB acting in a major way to boost amounts of sustainable investments across the EU, such as through a promise to ratchet up its purchases of green bonds as this market grows bigger. These could include relevant bonds issued by the European Investment Bank.
- On implementing prudential measures to increase resilience to climate risks and reducing dirty financial flows: the approach outlined by the ECB focuses on developing more metrics, scenario analyses and macroeconomic modelling, and conducting more climate stress tests of financial institutions. The ECB also suggests it will consider developing minimum standards on incorporating climate risks into credit ratings. The ECB needs to be more proactive in correcting the markets, taking a precautionary approach rather than relying so strongly on disclosures and risk assessment.
- On climate disclosures and transparency: it is welcome that the ECB will begin to disclose climate impacts of its corporate QE, following in the footsteps of the Bank of England. But while the Bank announced an array of statistical and risk measures relating to climate, it failed to commit itself to public scrutiny and regular reporting of climate risks – and progress on shifting European finance to become Paris-aligned – to elected officials such as the European Parliament.
Activists have been targeting the European Central Bank and it’s president, Christine Lagarde, for 18 months with protests, petitions, open letters to decision-makers, and online tactics demanding that the bank drops its own fossil fuel assets, and sets rules for private banks to cut the flow of finance to fossil fuels. Today’s decision reflects the pressure that people power has brought to bear on governors at the bank.
However, this announcement could be stronger. The conservative International Energy Agency is calling for an end to new fossil fuel investments. But this new climate plan from the European Central Bank could be slow to implement and invites a lot of technical discussion that might create loopholes for some dirty investments.
Julia Krzyszkowska, Europe campaigners at 350.org, said: “Today’s news is a victory for the climate justice movement, and the 165,000 people who signed a petition calling for an end to fossil finance and campaigned for over a year to put the climate crisis at the top of the bank’s agenda. The ECB is sending a clear signal: the era of fossil fuel finance is rapidly coming to an end. Now, it’s time for private banks and investors to urgently catch up, and cut their ties with the toxic coal, oil and gas industry.”
“We are happy that months of protesting against fossil finance are paying off but we will keep watching the ECB’s actions. Too often we have heard pretty words that mean nothing but greenwash. We will continue to protest until the governing council sets strong and clear rules to drop fossil fuel assets and properly regulates the financial sector against climate chaos.” said Rika von Gierke, activist who has been part of various protests targeting ECB and the Bundesbank throughout the strategic review.
Although the ECB did not give in to its most conservative members’ plea for inaction, the compromise is too weak, too vague, and incomplete to put an end to ECB’s support to polluters and will take years to yield any result.
Paul Schreiber, campaigner at Reclaim Finance, said:
“While the ECB overcame the hawkish opposition to climate integration in the Covid-19 context, the bank continues to turn a blind eye to its mandate that requires it to contribute to EU objectives. In doing so, the ECB is also scorning the calls of tens of thousands of Europeans that want the central bank to work in favor of the climate instead of the polluters.
“By centering its climate strategy solely on the integration of climate risks, the ECB is doing the private financial players a favor. The only way to effectively reduce ECB’s support to polluting activities is to decarbonize its operations. But even there the ECB falls short: its proposal does not apply to its collateral framework, it is too vague to ensure the end of support to big polluters and will not be implemented before 2023. Likewise, the ECB makes no propositions to help the EU achieve its climate goals.
“Given the weakness of the recently announced sustainable finance strategy and the EU green finance taxonomy opening the door to harmful activities such as fossil gas, it is especially worrying to see that the ECB wants to base its climate ambitions on these very low common denominators.”
Reclaim Finance have produced an analysis of all the suggested policies in detail.
Statements from the US
Evergreen Action executive director Jamal Raad released the following statement:
“The ECB climate action plan puts forward meaningful steps to ensure that the European financial system is assessing and addressing climate risk. Financial regulators in the United States must be quick to follow suit. President Biden’s executive order this May was a powerful starting gun—but now, agencies, particularly those that make up the Financial Stability Oversight Council, must follow through.
“Before COP26 in November, our financial regulators must make clear how they will marshal every tool available to address climate risk, hold Wall Street accountable for their fossil fuel investments that continue to exacerbate climate risk, and protect the financial security of every American. Without a strong plan in place at home, our attempts to lead the international community cannot succeed.”
Tracey Lewis, senior finance policy analyst with 350.org took a similar stance:
“This commitment from the European Central Bank makes it even more shocking how short Jerome Powell is falling as Federal Reserve Chair. While the ECB begins to act on fossil fuels as a direct risk to our climate and financial systems, the Fed dangerously abdicates responsibility. We the people are rising up to demand President Biden, Secretary Yellen, and the Senate appoint a real climate leader to champion the Fed as the Peoples’ Bank.”
Don’t miss: Yanis Varoufakis’s explosive piece on the ECB
This page was last updated July 12, 2021
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