CC-BY-4.0: © European Union 2023– Source: EP
Key points
- Christine Lagarde is stepping down as ECB president early, with two other board seats falling vacant in 2027.
- Under Lagarde, the ECB has built climate risk into its supervision, bond buying and collateral rules.
- Campaigners fear the shake-up could leave the board without a green champion, especially if Frank Elderson also departs prematurely.
- Thinktanks and campaigners say climate risks threaten price stability and are part of the ECB’s core mandate.
The European Central Bank (ECB) is about to get a shake-up. With Christine Lagarde stepping down as president eight months before her term ends and two other board members due to leave in 2027, the ECB board will look very different in the new year.
While expected, the board turnover raises questions about what comes next for the ECB’s climate focus. Will Lagarde’s climate legacy continue? Or will other issues take the forefront?
A reactive or proactive ECB?
When Lagarde took the helm of the ECB in 2019 the central bank was just starting to dig into how climate could affect the broader economy.
Under her leadership, the ECB has established that climate change has profound implications for price stability, expanded its supervision to include climate risk, tilted its bond purchases, added a climate factor to its collateral framework and issued its first climate risk fine.
For Clarisse Murphy, central bank campaigner at French nonprofit Reclaim Finance, the biggest concern is not whether the ECB will backtrack on climate issues but whether it will simply react to them or start to be proactive.
“They have all the evidence that price stability and financial stability are very much impacted by climate change, by nature degradation,” she said.
Deciding that climate risk is not part of the ECB mandate of price stability would not only go against its own research on the matter, but also counter “what the entire international community of central banks has said in the last few years”.
Research from the ECB shows that economic activity decreases in regions hit by heatwaves and droughts for several years after, while three quarters of businesses in the euro area depend heavily on nature. The ECB’s monetary policy strategy acknowledges the impact that climate has on price stability, and the central bank has integrated many of these issues into its work through its climate change centre.
The impact of extreme weather is likely to get worse, said Murphy, as increasing evidence shows that the world is likely to overshoot 1.5C.
“The evidence is only going to go stronger for the central bank to actually do something about this,” she said.
The discussion now is about how to reduce overshoot and limit the impact of fossil fuel dependency. The EU has faced two price shocks from fossil fuel dependency under Lagarde’s leadership. The first was when Russia invaded Ukraine in 2021. The most recent and current supply shock still underway has come from the US-Israel war in Iran, which, coupled with a lethally hot summer, has dampened economic growth and increased inflationary pressures not just in the EU, but globally.
These shocks will make it difficult for the ECB to simply ignore climate risk, said Laura Casonato, head of policy at Positive Money Europe.
“It’s a bit unlikely that the ECB ignores all of this,” she said.
Lagarde’s successor
So far there are two main candidates to succeed Lagarde: Pablo Hernández de Cos from Spain and Klaas Knot from the Netherlands.
If Knot wins the nomination, then ECB executive board member Frank Elderson is expected to step down early. While not legally required, in practice the ECB executive board member is composed of members from different EU member states.
If Elderson does step down, then it’s possible that there will be no green champion on the executive board, said Casonato. Elderson has long been seen as the de facto voice of green policies at the ECB, although Lagarde and other executive board members have also spoken publicly about the impact of climate change and nature loss on the bloc.
Ultimately, it will depend on how the political landscape goes, said Casonato. Although the ECB is an independent body, the process for selecting the board is not only political, but is very opaque and complex.
Adding to the complexity are negotiations over which countries will get the other two vacant posts – chief economist, currently held by Irishman Philip Lane until May, and markets operations, held by Germany’s Isabel Schnabel until the end of the year.
What follows over the next few weeks is intense closed-door negotiations among finance members of the Eurozone working group. While the appointments are confirmed by the European Council and the European Parliament can provide their own recommendations, they have very little say over who is ultimately nominated.
What’s next
Regardless of whether the next board favours green monetary policies or not, climate and nature risks will not disappear, said Alba Berhami Sintomer and Faith Hammond, policy advisors at thinktank E3G.
“Whatever the leadership, the ECB should continue explaining what the evidence means for price stability and, within its responsibilities, financial stability. This is about delivering its mandate, not pursuing a political preference,” they said.
Campaigners are already pushing for the next ECB leader to take a stronger stance on climate change.
Casonato called for the ECB to introduce a lower interest rate for green projects.
“With more interest rate rises impacting those looking to invest in clean industries, there is surely no better time than now to implement a dual rate of borrowing to help that sector, the economy and the planet,” she said.
Integrating climate risk should be a lasting ECB commitment, and “the next phase should turn risk analysis into practical resilience,” said Sintomer and Hammond.
A change in leadership will not change the risks, they added, and there is a need for the ECB to work with other EU regulators on issues such as the insurance gap, which puts a significant strain on public finances and ultimately, economies.
“Climate shocks affect prices, borrowers and public finances,” they said. “Addressing them is part of the ECB’s core mandate, not an optional extra.”
These problems are not going to go away, Murphy from Reclaim Finance emphasised.
“I’m just hoping that whoever is next is going to be as ambitious, if not more ambitious, than Lagarde because I think the problems are only going to get worse, and we need to have a central bank that is proactively trying to combat climate change and address these problems,” she said.
The ECB declined to comment.
This page was last updated November 12, 2026
Written by
Moriah Costa is the Editor-in-Chief of Green Central Banking and has over a decade of experience writing about banking and finance. She is an award-winning American journalist based in Paris and has written for major international publications, including Reuters, The Guardian, and S&P Global. Having grown up in water-stressed Arizona, she has always had a strong interest in bringing awareness to climate and environmental issues.
