Central Banks

European Central Bank European Central Bank

Under president Christine Lagarde, the European Central Bank put climate change at the centre of a major strategic review, and published a wide-ranging climate roadmap.

Although its decision to draw up the document was welcomed, campaigners have criticised the ECB’s limited progress towards greening its monetary policy operations and macroprudential framework.

Climate action

  • The ECB has developed a climate roadmap.

  • The ECB has committed to incorporate climate considerations in its corporate sector purchase programme.

  • The ECB is conducting the first Europe-wide climate risk stress tests.

  • ECB policymakers have signalled the central bank will consider climate risk in its calculation of banks’ capital requirements.

Climate inaction

  • The ECB’s corporate sector asset purchases and collateral framework have been found to have a bias towards high-carbon companies.

  • The ECB’s refinancing operations are considered to be climate-blind, therefore undermining the EU’s climate goals.

  • The ECB has not given its support to adjusting Pillar 1 capital requirements to align financial flows with the green transition.

  • The ECB has not integrated climate risks into its own internal credit ratings.

Christine Lagarde

President of the European Central Bank

Term of appointment

18 October 2019 - 18 October 2027

How the European Central Bank stacks up

Rank Country Aggregate Score (out of 130) Grade (A+ to F) Research and Advocacy (out of 10) Monetary Policy (out of 50) Financial Policy (out of 50) Leading by Example (out of 20)
4 European UnionEuropean Union 58 C 10 12 28 8

Central Bank/Supervisor

European Central Bank and European Banking Authority

More info

Research & Advocacy

10 out of 10

High-impact

  • N/A

Medium-impact

  • ECB and EBA are NGFS memers

Low-impact

Monetary Policy

12 out of 50

High-impact

  • N/A

Medium-impact

Low-impact

  • Advanced ESG data model in the Centralised Securities Database, identifying all types of sustainable bonds; will rank sustainability level as “self labelled”, “verified by a second party” and “fully certified”

  • ECB accepts sustainability-linked bonds as collateral

  • ECB will make environmental sustainability disclosures a condition of eligibility in collateral purchases (formal commitment, implementation in 2026)

  • ECB will make environmental sustainability disclosures a condition of eligibility in the corporate sector purchase programme (formal commitment, implementation in Q1 2023)

  • ECB purchased green bonds under both the corporate and public sector purchase programmes

  • Climate change risks incorporated into haircuts applied to corporate bonds used as collateral (under discussion at ECB)

  • Eurosystem will implement a set of common minimum standards detailing how national central banks’ in-house credit assessment systems should include climate-related risks in their ratings (formal commitment, implementation in 2024)

Financial Policy

28 out of 50

High-impact

  • Climate-related quantitative and qualitative restrictions on banks’ portfolios (under discussion at ECB)

Medium-impact

Low-impact

Leading by Example

8 out of 20

High-impact

  • N/A

Medium-impact

  • N/A

Low-impact

What steps are missing in the European Central Bank toolbox to address climate risk?

Civil society expects the bank to do the following:

  • Replace ‘market neutrality’ with a new benchmark aligned with the EU environmental policies and commitments.

  • Fully decarbonise its collateral framework and asset purchases.

  • Adjust its refinancing operations in line with climate goals.

  • Integrate climate risks into its own internal credit ratings for collateral and asset purchases.

  • Support development and implementation of prudential measures to align financial flows with the 1.5°C targets of the Paris Agreement.

Latest News

News| May 24, 2023

Europe experiences climateflation as prolonged drought inflates prices

Repeated droughts and the highest inflation rates of the 21st-century increase concerns about climateflation. …
News| May 12, 2023

Elderson highlights gaps in climate finance

Elderson says the EU is losing the “race against the clock” to close the climate finance gap, underlining the need for immediate action to align with the Paris Agreement.
News| May 2, 2023

Central banks have a ‘core duty’ to fight against climate change, says BdF’s Villeroy

The ECB board member also said that central banks should provide market incentives to induce changes in the financial industry but that they can’t be the only institutions inciting change. …
News| April 26, 2023

Reduce ‘climate insurance protection gap’, say ECB and EIOPA

The European bodies have called for governmental action to increase the use of climate catastrophe insurance.
News| April 24, 2023

Climate considerations ‘should not be seen as controversial’, says Elderson

The ECB board member also argued that central bankers are “climate and environmental policy takers”, in that they “need to take climate and environmental factors into account”.
News| March 28, 2023

ECB disclosures say corporate holdings on ‘decarbonisation path’

Reports are based on the ECB’s corporate securities holdings under two monetary policy programmes, its green funds portfolio and its staff pension fund.
News| March 21, 2023

EU supervisors to test financial system’s ability to meet climate goals

The European supervisory authorities, the European Central Bank, and the European Systemic Risk Board are all expected to participate in a one-off climate risk scenario analysis.
Opinion
News| February 27, 2023

EU parliament tackles ECB’s ‘long-neglected’ secondary mandate

MEPs have adopted a resolution allowing the ECB to align its policies with EU objectives in addition to price stability. This is a golden opportunity to green monetary policy, says Adua Dalla Costa of Positive Money.
News| February 23, 2023

EU politicians back improved building energy requirements

MEPs have voted in favour of improved energy efficiency in buildings, going beyond measures set out in a proposed European Commission directive.
News| February 21, 2023

What are climate-adjusted capital requirements?

Much discussed but not yet in force, climate-adjusted capital requirements are viewed by many as a key element in the bank regulation toolkit to address climate-related risks.

Latest Research

The Asymmetric Effects of Weather Shocks on Euro Area Inflation

May, 2023

Weather shocks have asymmetric and non-linear impacts on inflation in the eurozone that introduce significant price volatility, according to research from the European Central Bank.

Written by European Central Bank

How Green is Our Balance Sheet?

April, 2023

The ECB says climate disclosures show that its investment strategy is “bearing fruit” on decarbonisation, but that ambitious action is needed as monetary policy tightening reduces its opportunities to tilt its portfolio.

Written by European Central Bank

Results of the 2022 Climate Risk Stress Test of the Eurosystem Balance Sheet

April, 2023

The European Central Bank’s 2022 stress test finds that the Eurosystem’s balance sheet is materially exposed to climate risks and that the corporate bond portfolio is the primary source of exposure.

Written by European Central Bank