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What's our roadmap to greening monetary policy?

Climate change and the transition towards a greener economy can have an effect on price stability. We need to be ready and take climate change risks into account when making our policy decisions.

We at the ECB are doing our part to tackle climate change within our mandate.

As a result of our strategy review, we’ve agreed on an ambitious roadmap on how to integrate climate change considerations into our monetary policy work. What are the pillars on our road ahead?

First pillar: Paving the way towards reliable data and robust models

We will gather data needed for climate change risk analyses

Climate-related policies and measures depend on reliable data. That’s why we work on new indicators that help to assess carbon footprints of the portfolios of financial institutions. We will also look at how to measure their vulnerability to climate-related physical risks and will work to improve our indicators in relation to green finance, in line with progress at EU level on environmental sustainability disclosure and reporting.

We will adapt our models and make them fit for climate change

Macroeconomic models are at the heart of our analyses and decisions. We will enhance our models to better take into account the effects of climate change. This will help us to assess the impact of climate change and related policies on the economy, on the financial system and on how our monetary policy feeds through to people and businesses.

Second pillar: Knowledge is the driving force

We will check our own exposure to climate risks

We will be carrying out stress tests of our own balance sheet in 2022 to check how exposed it is to climate risks.

We will make disclosure of climate risks a priority

To effectively assess climate risks and how they could affect us as well as banks and businesses, we need to know much more about those risks. That’s why we will introduce climate-related disclosure requirements for using private sector assets as collateral in our monetary policy operations and for our private sector asset purchases. We will announce further details in 2022.

We will review how credit ratings reflect climate risks

Ratings provided by credit rating agencies are a key tool to understand the overall riskiness of assets. Therefore we are checking how ratings agencies include climate risks in their ratings. Additionally, we will consider developing minimum standards to ensure that those risks are consistently included in our own internal assessments.

Third pillar: Action in our monetary policy implementation framework

We will include climate risks into our collateral framework

We will consider climate risks when evaluating assets that banks want to use as collateral to get loans from us. This means that assets with higher climate risks could be treated differently than assets with lower climate risks. We will keep supporting innovation in the area of sustainable finance. Since the beginning of 2021, we accept certain sustainability-linked bonds as collateral and for our asset purchases.

We will make our asset purchases greener

We will further include climate-related criteria when guiding our corporate asset purchases. This could include looking at how issuers are complying with the Paris Agreement or how they are committed to similar goals. Additionally, as of 2023 we will start disclosing climate-related information on our corporate asset purchases.

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