From ambition to action: how to improve the ECB’s climate factor

The European Central Bank (ECB) is integrating a 'climate factor' into its collateral framework to account for climate transition risks when banks borrow from the ECB. This factor calculates an 'uncertainty score' based on sector exposure, company-specific emissions and disclosures, and asset maturity. Reclaim Finance argues that the current design is flawed due to annual rather than automatic calculations for new assets, a lack of transparency regarding the factor's parameters, and penalties that may be too small to deter the worst polluters. Furthermore, the document notes that the factor currently applies to less than 5% of pledged collateral (non-financial corporations) and urges the ECB to extend it to other asset classes, specifically credit claims, which represent nearly 30% of pledged collateral.

• The ECB's climate factor determines the penalty for assets used as guarantees by banks, based on an 'uncertainty score' derived from sector-specific stressors, issuer-specific stressors (emissions, decarbonization pathways, and disclosures), and the asset's residual maturity.
• The current implementation of the climate factor lacks automation and transparency; assets becoming eligible between annual updates are assigned a median factor, and the ECB does not publish the factor for individual assets or its minimum value.
• The climate factor may be insufficient to end indirect support for the worst polluters because it is expected to remain relatively high, resulting in small penalties and no total exclusion of assets.
• The climate factor's current scope is highly restrictive, applying only to assets from non-financial corporations and affiliates, which constitute less than 5% of pledged collateral.
• Extending the climate factor to credit claims would be highly impactful, as these assets represent nearly 30% of the collateral pledged by banks.

APA

Martin, L. (2026). From ambition to action: how to improve the ECB’s climate factor. Reclaim Finance. https://reclaimfinance.org/site/en/2026/06/15/from-ambition-to-action-how-to-improve-the-ecbs-climate-factor/

Chicago

Martin, Léo. From ambition to action: how to improve the ECB’s climate factor. Reclaim Finance, 2026. https://reclaimfinance.org/site/en/2026/06/15/from-ambition-to-action-how-to-improve-the-ecbs-climate-factor/.

Wikipedia

{{cite press release |last1=Martin |first1=Léo |title=From ambition to action: how to improve the ECB’s climate factor |publisher=Reclaim Finance |date=15 June 2026 |url=https://reclaimfinance.org/site/en/2026/06/15/from-ambition-to-action-how-to-improve-the-ecbs-climate-factor/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{martin2026from, author = {Martin, Léo}, title = {{From ambition to action: how to improve the ECB’s climate factor}}, publisher = {Reclaim Finance}, year = {2026}, month = jun, url = {https://reclaimfinance.org/site/en/2026/06/15/from-ambition-to-action-how-to-improve-the-ecbs-climate-factor/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }