More than 40 civil society organizations and 20 experts signed an open letter calling on the European Central Bank (ECB) to green its monetary policy this year. The signatories emphasize the need to rethink the outdated climate and nature approach of the central bank and implement concrete measures to support the green transition whilst contributing to price and financial stability. In addition to the Open Letter, the civil society organizations wrote a manifesto detailing these measures needed to decarbonize refinancing operations, the collateral framework and monetary portfolios.
Dear members of the European Central Bank Governing Council,
Four years ago, the European Central Bank (ECB) adopted its Climate Roadmap as part of a monetary policy strategy review (1). This marked a welcome turn in how climate change was considered by central banks across the Eurosystem and integrated into their activities. But times have changed, bringing a new set of opportunities and challenges along the way for the Governing Council to consider.
Central banks’ understanding of the link between climate change and monetary policy has improved, various climate stress tests have been carried out, (2) and deadlines were set for banks to meet climate-related risk expectations (3). European central banks have also recognised the need to extend the initial focus on climate to a more holistic approach also encompassing nature degradation and biodiversity loss (4).
At the same time, the ECB’s green agenda has experienced significant hurdles. High inflation, caused by Europe’s dependency on fossil gas, transformed the economic context and monetary policy operations. Asset purchases, once abundant, are now being phased out, effectively ending the climate tilting policy introduced in the Roadmap (5). Interest rates were raised to a restrictive stance, harming green investment and hampering the energy transition (6).
Yet, the ECB has repeated that a faster and orderly transition is essential for price and financial stability (7). Furthermore, as climate change and nature degradation intensify, so will their impact on monetary policy and the whole financial system. And, maintaining our fossil fuel dependency leaves us vulnerable to future price shocks.
In light of the situation, we urge you, the ECB Governing Council, to put forward a new and improved Climate Roadmap as part of the monetary policy strategy assessment to be concluded in 2025. Concrete measures that should be introduced include updating the collateral framework, tilting the stock of securities in the asset portfolios, and introducing green lending facilities (as explained in the Manifesto Stability Through Sustainability: three recommendations for the ECB’s 2025 Monetary Policy Strategy Review). We stress that, by implementing these measures, the ECB’s monetary policy would more effectively fulfil its primary mandate. Additionally, it would be more aligned with its secondary objective to support the EU’s economic goals, which include the green transition and sustainable economic growth.
The ECB is at a crossroads. It can take satisfaction in its progress thus far, leaving a gulf of ambition to the true scale of the challenge. Or it can use that progress as a stepping stone towards developing a monetary policy strategy fit for ensuring stability in the face of the nature and climate crises. Although governments should lead on environmental policies, the ECB has a responsibility to mobilise monetary policy to integrate climate and environmental risks and support the green transition to uphold its mandate.
We, the undersigned, hope you will consider our demands when reviewing the ECB monetary policy strategy. We stand ready to contribute constructively to this work, within our expertise.
Signatures from organizations
- Agir pour le Climat
- AnsvarligFremtid
- ASUFIN
- Attac España
- Attac France
- BankTrack
- Campax
- ClientEarth
- Coal Action Network
- Denktank Minerva
- ECCO Climate
- Ecodes
- EcoZ
- Eko
- Ember
- Facing Finance
- FairFin
- Federación de Consumidores y Usuarios CECU
- Finance Watch
- Financité
- Finanzwende
- Hiilivapaa Suomi (Coal-Free Finland)
- Institut Rousseau
- Leave It in the Ground Initiative (LINGO)
- Les Amis de la Terre France (Friends of the Earth France)
- Mellemfolkeligt Samvirke
- Monetary Diversity
- New Economics Foundation
- Opportunity Green
- Positive Money
- Reclaim Finance
- ReCommon
- Réseau Action Climat France
- REVO Prosperidad Sostenible
- The Sunrise Project
- Sustainable Finance Observatory (ex 2 Degrees Investing Initiative)
- UGT, Unión General de Trabajadoras y Trabajadores
- Urgewald
- Veblen Institute for Economic Reforms
- WWF
- ZERO
Signatures from individual experts
- Bezemer Dirk, Full Professor of Economics of International Financial Development at University of Groningen, the Netherlands
- Chenet Hugues, Associate Professor, IESEG School of Management, France; Honorary Senior Research Fellow, University College London, UK
- Couppey-Soubeyran Jézabel, Assistant Professor Université Paris 1 Panthéon-Sorbonne and scientific advisor of Veblen Institute, France
- Dafermos Yannis, Reader, SOAS University of London, UK
- Deyris Jérôme, Postdoc, SciencesPo, France
- Dufrêne Nicolas, Economist, President of Rousseau Institute, France
- Franka Nicolas, Economist, Founder at Monetary Diversity, Université de Liège, Belgium
- Grandjean Alain, Economist, President of The Other Economy, France
- Kedward Katie, Senior Research Fellow, Institute for Innovation and Public Purpose, University College London, UK
- Nikolaidi Maria, Associate Professor, University of Greenwich, UK
- Plihon Dominique, Economist and emeritus professor at University Sorbonne Paris Nord, France
- Polzin Friedemann, Associate Professor, Utrecht University School of Economics, the Netherlands
- Refait-Alexandre Catherine, Full Professor, University of Franche-Comté, France
- Roventini Andrea, Professor, Scuola Superiore Sant’Anna, Italy
- Sanders Mark, Full Professor at Maastricht University School of Business and Economics, the Netherlands
- Scialom Laurence, Professor University Paris Nanterre, EconomiX UMR CNRS, France
- Van ‘t Klooster Jens, Assistant Professor of Political Economy at the University of Amsterdam, the Netherlands
- Van Doorslaer Hielke, Postdoc, Ghent University and researcher at Denktank Minerva, Belgium
- Van Tilburg Rens, Economist at Sustinnova, the Netherlands
- Wullweber Joscha, Full Professor, Witten/Herdecke University, Germany
