In July 2021, after a lengthy revision process, the European Central Bank (ECB) presented a “climate roadmap”. It marked a major shift in the central banks’ thinking but failed to address climate emergency. The measures it contains will take years to have an effect and are limited in scope.
The ECB did not even cut its support – through asset purchases and the acceptance in the list of collaterals – to the most polluting companies, including companies that develop new fossil fuel supply projects. While it was finalizing and publishing its climate roadmap, the ECB continued to buy bonds from the five EU oil and gas majors through its Covid-branded stimulus package. This led it to by an estimate €80 billion of bonds from carbon-intensive companies from March 2020 to September 2021, including €15.3bn of fossil fuel bonds.
Furthermore, the ECB’s roadmap did not contain any measure that would help the EU reach its climate goals and accelerate its decarbonization. This is a critical flaw in a time where the EU is scrambling to respond to both the energy price crisis and to speed-up its ecological transition.
Building on this assessment, Reclaim Finance and 16 partners built a position paper that calls on the ECB to support the low-carbon transition and to fully integrate climate impacts and risks into all its operations. This paper echoes the demand of EU citizens that pushed the ECB to take a bold approach to climate change and immediately stop supporting fossil fuel companies.
Civil society organizations propose four principles that the ECB must follow to build a fairer, more sustainable and democratic monetary system:
- Act on its legal obligation to support the EU’s general economic policies, as outlined in its secondary mandate under the EU Treaties
- Follow EU policymakers by recognising and enacting the double materiality principle
- Implement immediate impactful actions to align all its operations with a 1.5°C trajectory by adopting a precautionary approach and using existing data
- Work for society, by improving engagement with citizens and increasing democratic accountability
Accepting these principles entails implementing a set of five urgent measures to bring monetary policy in line with the Paris Agreement and EU objectives:
- Replace the “market neutrality” principle with a new principle that aligns with the EU’s environmental goals
- Decarbonise the quantitative easing programmes and the guarantees that the ECB accepts from banks when lending to them, notably by excluding fossil fuel developers
- Adjust the ECB’s lending operations to banks so that they support the green transition
- Take climate and environmental criteria into account when rating credit
- In its role as the supervisor of financial stability, support measures to direct money toward green activities