July 8th, 2021 – Today, European Central Bank (ECB) policymakers released their first strategy in almost two decades (1). Unfortunately, the ECB’s strategy focuses merely on climate risk integration, disregarding calls to align with EU climate objectives and aligning with private financial institutions insteadAlthough the ECB did not give in to its most conservative members’ plea for inactionthe compromise is too weaktoo vague, and incomplete to put an end to ECB’s support to polluters and will take years to yield any result.

The outcome of the review was not expected before September 2021 but ECB council members conducted several meetings in recent weeks to reach a consensus (2). Despite its claimed intention and attempt to “listen” to and consult European citizens (3), the ECB failed to hear the call of the 170 000 Europeans urging the bank to stop supporting polluters (4).

Conservative council members, such Bundesbank Governor Jens Weidmann (5), promoted low ambition measures centered on disclosure and ratings and opposed the review of the “market neutrality” principle. These measures – as well as consensual work on modelling and data for risk analysis – make up a large part of the ECB’s climate strategy.

In fact, climate integration proposals focus on climate-related risks and sideline the need to align with EU climate goals. Only two measures do not strictly concern building data and knowledge or integrating climate-risks: the adjustment of corporate bond purchases and the use of disclosure requirements in asset purchases and the collateral framework (a summary and analysis of ECB proposals is available in the table at the end of this press release).

Paul Schreiber, campaigner at Reclaim Finance, analyses:

“While the ECB overcame the hawkish opposition to climate integration in the Covid-19 context (6), the bank continues to turn a blind eye to its mandate that requires it to contribute to EU objectives. In doing so, the ECB is also scorning the calls of tens of thousands of Europeans that want the central bank to work in favor of the climate instead of the polluters. By centering its its climate strategy solely on the integration of climate risks, the ECB is doing the private financial players a favor. The only way to effectively reduce ECB’s support to polluting activities is to decarbonize its operations. But even there the ECB falls short: its proposal does not apply to its collateral framework, it is too vague to ensure the end of support to big polluters and will not be implemented before 2023. Likewise, the ECB makes no propositions to help the EU achieve its climate goals (7).”

He adds:

By deferring the review of its market neutrality doctrine (8), the ECB makes an unexpected U-turn, thus contradicting its own board members and disregarding the work of researchers and NGOs.Everybody thought the debate was over: market neutrality causes a dangerous carbon bias and must be immediately reviewed.”

The ECB climate change center (9) will coordinate the gradual implementation of the climate measures from 2021 to 2024 but no measures will be in place before mid-2022 (10). The ECB has announced periodic assessments of its strategy, the first one being scheduled 2025 (11).

The bank also stresses that implementation will depend on and align with EU policies and initiatives on sustainability disclosure, reporting and the EU sustainable taxonomy.

Paul Schreiber, campaigner at Reclaim Finance, stresses:

“One thing is very clear with this new strategy: the ECB postpones climate integration and will continue to support polluters until 2023 at the very least. Several climate measures could easily be further postponed as they rely on progress at the EU or company level.”

He continues:

“Given the weakness of the recently announced sustainable finance strategy (12) and the EU green finance taxonomy opening the door to harmful activities such as fossil gas (13), it is especially worrying to see that the ECB wants to base its climate ambitions on these very low common denominators.”

Press contact

Paul Schreiber, campaigner, paul@reclaimfinance.org

Annex – Analysis of the ECB’s climate strategy 

Area Measure Reclaim Finance’s analysis
General statement  Committing to “more systematically reflect environmental sustainability considerations in its monetary policy”.  This statement is welcome but, as ECB’s monetary policy currently does not reflect “sustainability considerations”, it does not give clarity on the bank’s actual level of commitment. 
Knowledge and data  Accelerate the development of macroeconomic models and conduct analyses to monitor the implications of climate change on the economy. 

Develop indicators covering green financial instruments, the carbon footprint of financial institutions and their exposures to climate-related risks.  

The ECB’s proposals to bridge knowledge gaps and build data and indicators are consensual and – although useful – do not reduce ECB’s support to polluting activities, nor help align its operations with EU objectives. 

This work could take several years. According to the the ECB’s roadmap, it will not be finalized before 2023-2024. 

The ECB seems to focus on “green” financial instruments but does not mention polluting or harmful ones.  

Risk management  Conducting climate stress tests of the Eurosystem balance sheet in 2022. 


Assess whether credit rating agencies accepted by the Eurosystem Credit Assessment Framework have disclosed sufficient information on how they incorporate climate change risks and consider developing minimum standards for the incorporation of these risks into the ECB’s own ratings. 

Consider climate risks when reviewing conditions under which assets are accepted as collateral by the Eurosystem. 

Conduct enhanced due diligence to incorporate climate risks to the corporate sector asset purchase programme (CSPP). 

In general, risk-related measures are not sufficient to limit ECB’s support to polluters or align with EU objectives. They must be paired with strong climate-related measures. This is especially problematic for the collateral framework, as the ECB do not propose any complementary measures to decarbonize it beyond risk integration. 

Risk metrics are still under development today and – as stressed by the NGFS and Frank Elderson himself – central banks can already act based on the information available. Furthermore, climate risks is characterized by a radical uncertainty that makes them especially difficult – if not impossible – to precisely assess. The ECB should adopt a precautionary approach to climate risks and consider the high-risk level tied to fossil fuel assets. 

 The incorporation of climate risks to the ECB’s own ratings remains uncertain and should be confirmed. 

Climate change mitigation  Adjust allocation of corporate bond purchases to incorporate climate change criteria, notably “the alignment of issuers with EU legislation implementing the Paris agreement” or “commitments of the issuers to such goals”.  

 Introduce disclosure requirements for private-sector assets as “a new eligibility criterion or as a basis for a differentiated treatment” for collateral and asset purchases, with a detailed plan to be announced in 2022. 

ECB’s proposal to adjust corporate sector purchases is flawed: 

  • It relies on dangerously unprecise criteria: The “alignment with EU legislation” will have to be precisely defined and to include – in line with climate science and recent IEA work – the exclusion of any company that develops new fossil fuel project. Furthermore, using only the “commitments” of issuers to assess the eligibility of bonds would allow companies to continue benefit from ECB support while failing to follow their pledges. 
  • It could allow major polluters to continue to benefit from asset purchases: 

The ECB’s proposal does not specify whether climate change criteria will be used to define the eligibility of bonds, to simply tilt bond purchase allocation, or to do both. We recommend the ECB excludes companies that are at odds with EU climate objectives – notably companies developing fossil fuels – and further tilts its purchases to align them with EU objectives. We provided feedback on the Bank of England’s approach that – if improved – could serve as an example for the ECB. 

 The ECB’s asset purchase adjustment will not be implemented before 2023, thus maintaining support for highly polluting companies for at least two more years. As stressed in a joint letter from NGOs, to limit climate impacts the ECB should immediately exclude the most harmful companies while waiting for the implementation of a global Paris-aligned strategy. Furthermore, the ECB’s climate adjustment proposal does not apply to its collateral framework and should be extended to cover it. 

It is worth noting that the ECB makes no proposal to support EU climate policies. Several such measures were proposed by researchers and NGOs, notably to using refinancing operations 

The ECB’s proposal on disclosure does not reduce the ECB’s support to polluting companies, nor does it align ECB operations with EU climate objectives. This new requirement also risks being used to delay ECB climate action, as they will not come into force before 2024 and ultimately rely on progress made by companies on reporting. Moreover, the ECB suggests that disclosure requirement could only be used as “a basis for differentiated treatment”, meaning that assets from companies that do not disclose data could remain eligible to purchases and accepted as collateral. 

Market neutrality doctrine  Assess potential biases in the market allocation and make concrete proposals for alternative benchmarks, in particular for the corporate sector asset purchase program (CSPP).  The fact that the ECB plans to do further work to assess potential biases and inefficiencies caused by its current market neutrality principle is surprising. Indeed, the fact that the current market neutrality doctrine causes a bias in favor of high carbon assets has been demonstrated by researchers, NGOs, and the ECB itself, and even acknowledged by Isabel Schnabel. Furthermore, Frank Elderson and Isabel Schnabel clearly stressed that market neutrality was not enshrined in EU treaties and could be reviewed. 

 We recommend the ECB reviews its market neutrality doctrine to fully align its operations with EU climate objectives, thus contributing to the EU transition while reducing overall climate-related risks. 

Transparency  Start disclosing climate-related information of the corporate sector purchase program (CSPP) by the first quarter of 2023.  The ECB previously refused several information requests regarding the climate impact of its operations. While this new disclosure is welcome, ECB operations will remain opaque, and the bank could publish climate-related information on several other areas.  

Notes :

  1. The ECB’s last strategy review dates to 2003. The new strategy puts an end to a process – the “strategy review” – that started in January 2020 and was delayed with the Covid-19 pandemic. Apart from redefining its overall monetary policy approach, the ECB released dedicated content regarding its climate strategy.
  2. See the Financial Times’ coverage of the ECB’s retreat on June 18th, 2021.
  3. The ECB set up an online consultation process from February to October 2020 and – with Eurosystem central banks – organized several events. Events mainly allowed financial practitioners and key stakeholders to share their points of view and discuss with central bank staff. The result of the “ECB listens” online consultation is summarized in a specific report. It gathered 3 690 responses – with 15% of the responses received came from people following explanations and using a template provided by Greenpeace, Reclaim Finance, 350.org, SumOfUs, Urgewald, and LINGO. In parallel, an NGO-led survey gathered more than 24 000 responses. 81% of respondents to this survey said that climate, environmental and social issues should be the highest priority of the central bank. Almost 100% of respondents want the ECB to pay more attention to these topics.
  4. Several petitions were launched to push central banks to act on climate, and notably to immediately end all direct and indirect support to highly polluting companies such as fossil fuel companies. The ECB petition gathered more than 170 000 signatures, the Bank of France petition 55 000, and the Bundesbank petition 27 700. Several protests were also organized in Frankfurt, targeting the ECB or the Bundesbank.
  5. Reclaim Finance analyzes the flaws of the propositions championed by President Weidmann in a blog post. These measures would not consider EU climate objectives nor be appropriate to manage climate-related risks.
  6. Climate change integration was one of the initial topics of the strategy review. It was mentioned several times by Christine Lagarde at the beginning of the review and is clearly mentioned as one of the reasons for the need for a strategy review in ECB documents. However, it faced strong opposition from several ECB governing council members. Its most vocal opponents were the President of the Bundesbank – Jens Weidmann – and the governor of the National Bank of Belgium – Pierre Wunsch. Jens Weidmann’s position significantly evolved over time, he accepted the idea of decarbonization of asset purchases in June 2021.
  7. Positive Money Europe notably promoted the use of refinancing operations to support building renovation in Europe. A similar tool will soon be implemented by the central bank of Hungary.
  8. See Positive Money’s briefing for a detailed examination of the market neutrality principle. A criticism of market neutrality is also made in the NGO letter to the Bundesbank.
  9. See the ECB’s press release on its new climate center created in January 2021.
  10. The ECB published a roadmap giving a calendar for the implementation of climate-related measures.
  11. See the ECB’s policy strategy statement.
  12. See Reclaim Finance’s analysis of the EU sustainable finance strategy.
  13. See Reclaim Finance’s blog post on the EU sustainable taxonomy.