Agriculture is one of the sectors most exposed to nature-related risks, according to the European Central Bank. Photo: Barrie Williams / Scottish Government.
The European Central Bank (ECB) has revealed that a large part of its own portfolios are exposed to nature loss even as its disclosures show that the carbon emissions associated with its holdings continued to decline as it shifts to greener investments.
The ECB has said nature degradation poses a risk to the economy and that central bankers and supervisors should take note. An ECB research paper found that 72% of euro area companies are at risk of ecosystem degradation.
To address this concern, the ECB has added a new indicator to its climate-related disclosures that measures the exposure of the Eurosystem’s corporate portfolios to sectors with material dependencies or impacts on nature.
The Eurosystem covers the ECB and the national central banks of the euro area.
“While still only an initial estimate, this new indicator is another step towards improving our understanding of the risks and impacts of nature loss and highlights the importance of assessing the potential economic and financial consequences,” the ECB said.
The indicator shows that about 30% of the Eurosystem’s monetary policy corporate bond holdings are concentrated in utilities, food and real estate, the three sectors most exposed to nature loss. The ECB said exposure varies for its own funds portfolio and staff pension fund, but is highest at 40% for equity exchange-traded funds.
The ECB said carbon emissions associated with the Eurosystem’s monetary policy portfolios and the ECB’s foreign reserves continued to decline. The ECB’s governing council has set a target to cut emission intensity by 7%, on average, per year.
A climate stress test of the Eurosystem balance sheet found that its corporate bond holdings are most exposed to climate risk, which the ECB said confirmed its decision to favour issuers with a better climate performance.
The ECB said green bonds now make up 28% of its own funds portfolio, up from 20% in 2023, channelling over €6.4bn to the green transition. It aims to increase this share to 32% in 2025.
However, the ECB said measuring and comparing emissions of different issuers is still difficult due to a lack of data: “These challenges point to the need for reliable, harmonised reporting standards across sectors and jurisdictions to support informed investment decisions and effective risk management.”
Some experts have said that the Eurosystem not only needs to get the right data on climate and nature risk, it also needs to do something with the information.
“While European central banks have done plenty on supervising climate and nature risk in individual firms, they are only just beginning to impose prudential consequences for poor risk management and mitigation. More work is also needed on understanding how these risks should feed into regulatory capital requirements,” wrote Daphné McRae and Morgan Després from the European Climate Foundation in an article for Green Central Banking.
This page was last updated June 16, 2025
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Emma Thomasson is a British journalist, consultant and trainer based in Berlin. She is an expert in economics, politics, business and technology. She previously worked for Reuters as a correspondent and bureau chief in Germany, Switzerland, the Netherlands, South Africa and the UK.
