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| November 23, 2023

ECB threatens to fine banks over climate risk shortcomings

Around 20 EU banks have been sent letters warning they would be fined daily if they do not respond to climate risk shortcomings. …
Opinion
News| October 6, 2023

Christine Lagarde’s new economy

The president of European Central Bank has spoken of the need for an orderly transition to net zero, although all is not smooth in these uncharted waters, says Peter McKillop of Climate and Capital Media.
News| September 22, 2023

EU capital rules likely to include climate transition plans for banks

Leaked documents reveal ongoing developments in the inclusion and scope of EU banking climate transition plans and capital requirements.
News| September 18, 2023

A faster green transition period will also be cheaper, ECB finds

The ECB’s second climate stress test found that a faster transition towards a green economy would cost less than delaying the move. …
News| August 29, 2023

Climate change receives little attention at Jackson Hole Fed summit

Other than a mention by ECB president Christine Lagarde, climate change was not on the agenda at this year’s Jackson Hole summit. …
Opinion
News| July 26, 2023

ECB’s broken promise on bond decarbonisation creates climate gap

The ECB’s failure to remove bonds issued by carbon-intensive companies from its portfolio goes against its climate plans, says finance campaigner Kuba Gogolewski from Greenpeace.
Opinion
News| June 15, 2023

Where do eurozone central banks stand on climate policies?

Not all eurozone central banks are as active as the European Central Bank on climate-related policies, and some are even blocking progress, says Clarisse Murphy of Reclaim Finance.
News| June 14, 2023

Almost 75% of bank loans to companies highly dependent on nature, says ECB

The ECB’s latest report supplements current data establishing an interdependent relationship between nature and risks posed to the financial system.
News| June 6, 2023

Future warming will amplify food inflation by 50% by 2030, says ECB

A new paper from the ECB predicts that the warming climate will result in higher levels of annual food prices and overall inflation on a global scale.
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. …

Latest Research

Low Carbon Allocation in the Implementation of Monetary Policy

November, 2023

This paper reviews monetary and macroprudential tools, such as targeted green refinancing, that the ECB can use to speed up the green transition while maintaining price stability.

Written by European Parliament

How Climate Change Affects Potential Output

October, 2023

Climate change and the actions taken to tackle it will cause structural changes to the economy with “profound effects” on potential output, says this ECB report.

Written by European Central Bank

Green ECB Speeches Matter

October, 2023

The ECB’s green speeches have a “substantial and statistically significant impact” on stock returns and can be used to further green goals, finds this paper by senior officials at Hungary’s central bank.

Written by Magyar Nemzeti Bank