The European Central Bank (ECB) on Monday 19 September clarified how it will direct - from 1 October - its purchases of securities on the financial markets in order to ‘green’ its balance sheet in line with the commitment to the Paris Agreement on Climate (see EUROPE 12986/20).
Its purchasing decision will be based on three quantifiable criteria: - the past greenhouse gas emissions of companies compared to their peers in a specific sector as well as to all eligible bond issuers; - the targets set by emitters to reduce their greenhouse gas emissions in the future; - the quality of the assessment of the issuers’ communication on their greenhouse gas emissions.
Issuers’ climate scores will affect their relative weighting in the benchmark that guides the Eurosystem’s purchases of corporate bonds being reinvested.
“This will result in the purchase of more bonds issued by companies with a good climate performance”, the ECB said in a statement.
In addition, the Eurosystem will use the climate score to adjust its primary market offerings to favour issuers with better climate performance and to impose maturity limits on the bonds of lower-rated issuers.
The ECB will start publishing climate-related information on its corporate bond holdings from the first quarter of 2023 and will regularly report on the progress made in aligning with the Paris Agreement targets.
More info at: https://aeur.eu/f/35o (Original version in French by Mathieu Bion)