Introduction :
The ECB’s role in addressing climate change and environmental degradation is crucial for maintaining long-term price and financial stability. While the ECB’s 2021 Climate Roadmap made significant strides, including the green tilt in corporate bond purchases, it has not fully integrated climate and nature risks into its operations. This manifesto argues that the upcoming review of the ECB’s monetary policy strategy in 2025 presents a critical opportunity to strengthen its commitment to sustainability, align with the Paris Agreement, and ensure financial stability.
In particular, the ECB must take immediate actions to support the green transition and mitigate the risk of climate-related economic shocks. These steps are necessary to reduce Europe’s dependence on fossil fuels and achieve the EU’s decarbonization goals. Furthermore, it is essential for the ECB to incorporate a double materiality framework that addresses both climate change and nature degradation within its policy decisions.
Key Recommendations
1. Green Refinancing Operations
The ECB should introduce green refinancing operations (TLTROs) to offer preferential financing rates for banks lending to environmentally sustainable sectors, particularly renewable energy. This would help reduce Europe’s vulnerability to energy price shocks and promote a sustainable energy transition.
2. Greening the Eurosystem Collateral Framework
The ECB should reform its collateral framework to exclude high-emission assets, particularly from fossil fuel companies. By adjusting collateral eligibility and haircuts, the ECB can signal its commitment to sustainability while ensuring financial stability.
3. Aligning Asset Purchases and Monetary Portfolios with Sustainability Goals
The ECB must align its asset purchases and portfolios with the EU’s green transition goals. This includes actively managing its securities portfolio to support sustainable activities and divesting from companies that hinder progress toward climate goals.