On Tuesday 25 June, the European Central Bank (ECB) published its second set of information on the carbon footprint of assets held by the Eurosystem for monetary policy purposes and for the ECB’s foreign reserves. The document provides information on the degree of exposure to climate risks of the various assets, as well as aspects of governance and strategy. The declarations have been extended to cover almost 99.7% of the Eurosystem’s assets held for monetary policy purposes, excluding asset-backed securities (ABS).
For the ECB, the report indicates a reduction in the carbon emissions associated with the asset portfolios of Eurosystem companies, largely because issuers of securities are achieving better climate performance.
The ECB also believes that the Eurosystem’s ‘tilting mechanism’ for directing reinvestments to issuers with better climate performance played a significant role in reducing emissions from corporate assets in the monetary policy portfolios in 2022 and 2023. It attributes one fifth of the total reduction in emissions in 2022 and 2023 to this mechanism.
With the end of reinvestments under the APP asset purchase programme (see EUROPE 13202/6) and the reduction in holdings of securities under the PEPP asset purchase programme during the Covid-19 pandemic (see EUROPE 13425/1), the mechanism will de facto lose its effectiveness. The ECB is therefore exploring ways to further green its portfolio (see EUROPE 13175/9).
In this context, the ECB announced that the Governing Council was considering setting interim emission reduction targets for corporate portfolios under the APP and the PEPP, which would, at this stage, be used for internal monitoring of the private sector’s emission reduction path.
However, the ECB does not rule out assessing corrective measures on a case-by-case basis if deviations from the desired path are identified.
In addition, euro area sovereign bonds held under the PSPP and PEPP represent a significant proportion of the portfolios’ exposure to climate risks.
In particular, the ECB believes that reducing emissions from sovereign bonds depends primarily on governments and them meeting their commitments under the Paris Agreement.
Further information: https://aeur.eu/f/csy (Original version in French by Émilie Vanderhulst)