CENTRAL BANKS AND CLIMATE CHANGE

The document examines the role of the European Central Bank (ECB) in the climate transition, arguing that its monetary and prudential policies currently provide insufficient support for decarbonization. It highlights that the ECB's asset purchases and collateral frameworks continue to support high-carbon issuers and that its risk models minimize climate-related risks. The briefing proposes a 'green' ECB model featuring dual interest rates for green lending, the exclusion of fossil fuel developers from asset purchases, and increased capital requirements for banks lacking credible 1.5°C transition plans.

• The ECB can influence the green transition through four primary activities: setting key interest rates, determining collateral assets for refinancing, purchasing assets on the secondary market (quantitative easing), and supervising banks' prudential expectations.
• Current ECB practices regarding collateral and asset purchases favor carbon-intensive entities; a study indicated that carbon-intensive companies issue 59% of the corporate bonds the ECB accepts as collateral, despite contributing less than 29% to EU Gross Value Added (GVA).
• While the ECB recognizes climate change as a risk, it uses models that minimize these risks and has not yet required banks to hold additional capital for investing in polluting activities.
• The ECB's climate strategy is considered insufficient by NGOs and its own board member, Isabel Schnabel; specifically, its 'greening' of asset purchases does not exclude the most polluting companies or fossil fuel developers.
• The ECB lags behind the central banks of China and Japan, which have implemented measures to provide lower interest rates for green investments.
• A 'green' ECB would implement dual rates for a green lending facility to lower the cost of capital for renewable energy and energy-efficient building renovation.
• To align with the 1.5°C goal, the ECB should exclude fossil fuel developers from its collateral and asset purchase frameworks and require banks to adopt credible transition plans to avoid increased capital requirements.

APA

Reclaim Finance (n.d.). CENTRAL BANKS AND CLIMATE CHANGE. https://reclaimfinance.org/site/wp-content/uploads/2023/03/Press-Briefing-Climate-change-and-central-banks-Reclaim-Finance.pdf

Chicago

Reclaim Finance. CENTRAL BANKS AND CLIMATE CHANGE. n.d. https://reclaimfinance.org/site/wp-content/uploads/2023/03/Press-Briefing-Climate-change-and-central-banks-Reclaim-Finance.pdf.

Wikipedia

{{cite report |author=Reclaim Finance |title=CENTRAL BANKS AND CLIMATE CHANGE |url=https://reclaimfinance.org/site/wp-content/uploads/2023/03/Press-Briefing-Climate-change-and-central-banks-Reclaim-Finance.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{reclaimfinancendcentral, author = {{Reclaim Finance}}, title = {{CENTRAL BANKS AND CLIMATE CHANGE}}, institution = {Reclaim Finance}, url = {https://reclaimfinance.org/site/wp-content/uploads/2023/03/Press-Briefing-Climate-change-and-central-banks-Reclaim-Finance.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }