Copublished with Urgewald
The European Central Bank (ECB) is jeopardizing the transition to sustainable energy by endorsing companies relying on coal or developing new oil and gas projects, according to new research published today by Reclaim Finance and Urgewald (1). The findings highlight the ECB’s failure to implement measures to green its guarantee system, after proposed measures were abandoned in 2024. The groups are urging the bank to include measures in its on-going review of monetary policy strategy to prevent assets linked to environmentally destructive activities being accepted as guarantees (2).
New assets from nine fossil fuel companies, including oil and gas giants TotalEnergies, BP and Eni, have been added to the guarantee system since the measures were abandoned in July 2024, representing almost 13 billion euros of financing in total (3). These include assets with a maturity of up to 20 years, which sends a clear message to the financial system that fossil fuels can be seen as a safe investment for years to come.
Under the ECB’s collateral framework, banks pledge assets (e.g. corporate bonds) to guarantee loans, with the ECB determining which company assets can be pledged as guarantees. In 2022, the ECB said it would integrate climate in its collateral framework, including by restricting the share of assets issued by companies with high levels of greenhouse gas emissions. But in July 2024, the ECB abandoned this plan.
No new measures to address support for fossil fuel companies have been introduced since the plan was abandoned, but a number of fossil fuel companies have benefited from new guarantees. This can result in more favorable financing conditions for these companies (4).
The ECB has said it wants to green its operations, but in reality, it is supporting some of the most polluting energy companies in Europe. While central bankers procrastinate as to the way forward, sea levels are rising and communities around the world are feeling the heat from climate change. It is time the ECB stopped jeopardizing the transition to a sustainable future by ending its support for coal and for oil and gas expansion.
Clarisse Murphy, central bank campaigner at Reclaim Finance
Last month, Günther Thallinger, a board member of the insurer Allianz, warned that at 3°C of global warming ‘the financial system as we know it will cease to function’ and urged to take immediate action (5).
Decision makers in the finance industry see the fundamental threats of the deepening climate crisis in their lives and in their business. Thallinger’s analysis is a call to action also for financial regulators and central banks. The ECB should listen closely and take appropriate action to green its collateral framework.
Fiona Hauke, researcher at Urgewald
Reclaim Finance and Urgewald are urging the ECB and national central banks to use the ongoing monetary strategy review to stop accepting assets linked to environmentally destructive activities as guarantees and to exclude companies that are expanding the exploration and production of oil and gas or continuing to rely on coal.
