45 NGOs and think tanks ask Christine Lagarde to put climate at the center of the ECB’s action

Ahead of the monetary policy meeting of April 30th, 45 NGOs and think tanks wrote an open letter to the President of the ECB, Christine Lagarde. In this letter, NGOs underline the importance of maintaining the work, launched with the review of the ECB’s monetary strategy, to integrate climate objectives into the ECB’s action. They call on the ECB to follow 5 essential guidelines to link economic and financial responses to the crisis and the construction of a resilient, just and sustainable economy.

Reclaim Finance stresses that these goals require the exclusion of fossil fuel assets from the ECB’s asset purchase programs and refinancing policy.

On April 30th, the ECB’s board of governors gathers to discuss the monetary response to the crisis. In an open letter, 45 NGOs and think-tanks urge Christine Lagarde not to sideline climate in its responses to Covid.

“Confronting Covid’s social and economic consequences, the ECB’s response cannot be timid. However, providing indiscriminate financing and not conditioning help to even the most polluting sectors that block the ecological transition is irresponsible. Refusing to change the ECB’s rules is opting for the status quo that pollutes and undermine European solidarity. How would you explain to European citizens that the ECB, with its quantitative easing, helps corporations like Fortum [1] whose subsidiary Uniper is building a coal power plant in Germany and that threatens to sue the Netherlands to oppose its decision to phase-out coal by 2030 ?” comments Lucie Pinson, Director of Reclaim Finance.

Numerous analysis have shown that the ECB’s monetary and prudential tools contribute to strengthen climate imbalances. The principle of market neutrality guiding asset purchases [2] and refinancing operations [3] and the lack of climate stress-tests [4] are to blame.

Trillion euros released by the ECB to respond to Covid [5] are amplifying these flaws.

Signatories of the letter call upon the ECB to let go of this reasoning and to continue with its strategic review in order to integrate climate risks and impacts to its policies and operations. They identify 5 essential guidelines to do so.

Paul Schreiber, in charge of the supervision of financial actors at Reclaim Finance, explains:

“Christine Lagarde has to remind herself of her 2019 climate commitments to adopt the ECB’s monetary and prudential policies to social and climate emergencies. In 2019, she took position for the progressive removal of polluting assets of the ECB’s balance and the greening of the prudential framework. We expect nothing less today: giving up on European climate objectives would be validating the apparition of future disasters similar to the one we are currently facing. The most polluting businesses, starting with coal and the air sector, have to be excluded from ECB’s policies.”

[1] The list of corporate asset purchases (CSPP) include several companies linked to coal, such as Fortum, Enel, Engie, EnBW. It also includes numerous enterprises from the fossil fuel sector, like Total, Eni or Royal Dutch Schell. It is necessary to immediately exclude from the list of eligible assets corporations that do not commit to a coal phase-out, by 2030 in Europe and the OECD and 2040 worlwide, and to stop unconventional oil and gas and the development of new fossil fuel projects or infrastructures, and that do not adopt a 1.5°C alignment strategy.

[2] The ECB’s asset purchase program (or quantitative easing) finance numerous polluting corporations, including in the fossil fuel sector.

[3] The ECB’s refinancing policy, that allows banks to get financed by depositing assets to central banks without taking any environmental criteria into account, contributes to the asset value of fossil fuel assets and allows banks to obtain liquidity in exchange for highly polluting assets.

[4] With a prudential rules that don’t integrate climate-related risks, the ECB puts “brown” and “green” assets on the same level and increases financial risks for the whole financial system.

[5] Asset purchases will reach 1100 billion for 2020 and 3000 billion in liquidity will be released in a single year, thanks to a refinancing policy that favors banks and that accepts riskier assets.

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