MEPs vote overwhelmingly for greener ECB

Members of the European Parliament (MEPs) have called on the European Central Bank (ECB) to increase its environmental ambition and go beyond the actions outlined in its 2021 climate action plan.

Following a plenary debate on the parliament’s annual review of ECB monetary policy, legislators overwhelmingly passed a report calling for the central bank to incorporate climate-related risks into its operational framework on credit operations, collateral and asset purchases.

Although not legally binding, the annual debate and report is the European Parliament’s main process by which MEPs evaluate the policies of the ECB and provide democratic accountability.

The report says that tackling the climate and biodiversity emergency requires the ECB to take an integrated approach which should be reflected in all its policies, decisions and operations. In addition, the ECB needs to use all the tools at its disposal to fight and mitigate climate-related risks. Warning that ECB refinancing and asset purchase programmes have been indirectly supporting carbon-intensive activities, MEPs said that climate strategy should reflect the principle of double materiality and not focus solely on climate-related risks.

They also warned the ECB not to rely exclusively on private external credit rating agencies for climate risk assessments.

Addressing the plenary session, ECB president Christine Lagarde said that integrating climate-related indicators is essential to better understand how climate change is affecting the economy, the inflation outlook, monetary policy transmission and financial stability.

The ECB is working with eurozone central banks on new exploratory climate-related statistical indicators and macroeconomic models, Lagarde told MEPs. Climate related goals for this year include a detailed plan for disclosure requirements in the collateral framework and asset purchases, a pilot stress test on the Eurosystem balance sheet, and proposals to adapt the framework of corporate bond purchase programmes, she said.

Civil society groups broadly welcomed the final document. “This report is the most ambitious one on monetary policy of the last few years, and shows there is a solid cross-party consensus on the ECB’s duty to address climate change,” said Alessia Del Vasto, advocacy officer of Positive Money Europe. “It comes as a reward for the hundreds of NGOs, experts and thousands of citizens who mobilised over the past year to push this debate forward.”

Despite a last-minute push by the conservative European People’s Party to water down its climate change section, the report was passed by an overwhelming majority of 569 votes, with 84 against and 38 abstentions. This represents the largest majority supporting a European Parliament report on the ECB in the last 10 years.