Open Letter to the ECB Governing Council – November 19th 2020
Dear members of the ECB Governing Council
On December 10th, you will meet again to decide how the European Central Bank’s (ECB) response to the Covid-crisis will develop. Needless to say, since your last meeting on October 29th, the situation has continued to evolve rapidly.
Reacting to a new wave of Covid-19 and protecting their citizens, European countries are strengthening lockdown measures, thus dramatically slowing down economic activity.
Anticipating these changes, the ECB has already pledged to “recalibrate all its instruments1”, based on new macroeconomic projections, in December.
However, the progression of the pandemic and its economic, financial and social impacts are not the only things that have changed since your last meeting.
At the end of October, the public consultation phase of the ECB strategic review highlighted that the ECB urgently needs to integrate climate into its operations2
Several Governing Council Members have now publicly recognized the importance of this, and the President stated that they will explore “every avenue possible” to do so.
In this context, failing to factor the climate crisis into any new set of measures that you choose to adopt in December would delegitimize the commitments that have already been made and the ongoing review process, and would push Europe further away from a sustainable recovery by providing continuous support to the most polluting companies.
The ECB should immediately take two preliminary steps that would demonstrate its climate commitment without affecting the efficiency of its monetary response:
1. Fossil fuel companies should be excluded from corporate asset purchases5
and - while waiting for the strategy review to deliver a decarbonized and climate-friendly collateral framework - from the ECB’s list of collateral.
2. The ECB should set up a “green targeted long-term refinancing operations (TLTRO)” program. It could start with a limited pilot program that would not affect its other monetary operations and provide support to taxonomy-compatible activities.
These steps should be viewed as immediate action in the face of the pandemic, to ensure that the ECB’s response to one crisis does not make another crisis worse. They should however not in any way be seen as the only measures to be taken or preclude additional action being taken in the context of the strategic review7
- Reclaim Finance
- New Economics Foundation
- Positive Money Europe
- Institut Veblen
- Oil Change International