On March 26<\/span><\/span>th<\/span><\/span> 2021<\/span><\/span>,<\/span><\/span> C<\/span><\/span>hristine <\/span><\/span>Lagarde <\/span><\/span>responded<\/span><\/u><\/span><\/span> <\/u><\/a>to a question of several MEPs regarding the ECB\u2019s climate change policy. <\/span><\/span>Once again, <\/span><\/span>her<\/span><\/span> response <\/span><\/span>struggle<\/span><\/span>s<\/span><\/span> to <\/span><\/span>cover over<\/span><\/span> the ECB\u2019s inaction. Reclaim Finance <\/span><\/span>unpacks the ECB President\u2019s argu<\/span><\/span>ments<\/span><\/span>. <\/span><\/span> <\/span><\/span><\/b><\/span><\/p>\n Beyond exploratory work, the ECB should adopt a precautionary approach <\/span><\/span>to climate risks<\/span><\/span> <\/span><\/span><\/b><\/span><\/p>\n Christine Lagarde <\/span><\/span>highlights<\/span><\/span> the ECB\u2019s work on climate risks<\/span><\/span>, <\/span><\/span>through stress-tests, ESRB research and a Supervisory Guide.<\/span><\/span> If<\/span><\/span> the ECB has been making steady progress toward a better understanding of climate related risks, this exploratory work is yet to produce concrete measures, notably adjustments on macro or micro prudential requirements<\/span><\/span>. In fact, <\/span><\/span>as the <\/span><\/span>G20 Green Central Bank Scorecard<\/a><\/u><\/span><\/span> reveals, <\/span><\/span>the ECB and European regulators have taken no measures that would account for the risks <\/span><\/span>concentrated in high carbon sectors<\/span><\/span><\/strong>. <\/span><\/span><\/p>\n This is especially problematic as all climate risks analysis \u2013 including the <\/span>ECB\u2019s<\/u><\/span> <\/u><\/a>\u2013 show that <\/span>delaying action severely increases climate <\/span><\/b>risk<\/span><\/b>. While a delayed but fast-tracked transition will mainly increase transition risks<\/span>,<\/span> thus impacting the most carbon intensive sectors<\/span> first<\/span>, any global warming overshoot will significantly raise physical risks that <\/span>negatively impact<\/span> all economic activities \u2013 even in non-climate sensitive sectors \u2013 and overwhelmingly impact the <\/span>most vulnerable<\/a><\/span> communities. <\/span><\/p>\n ECB <\/span>should adopt a <\/span><\/b>precautionary approach<\/span><\/span><\/b><\/a> to climate risks, <\/span><\/b>i.e<\/span><\/b> contribute to mitigat<\/span><\/b>ing<\/span><\/b> climate change to <\/span><\/b>minimize the risks<\/span><\/b>. <\/span>Such an approach is <\/span>all the more<\/span> necessary <\/span>given <\/span>that<\/span> it is impossible to perfectly predict climate change and its impact<\/span>s<\/span>.<\/span> To respect their mandates<\/a><\/span>,<\/span> financial regulators<\/span> need to<\/span> consider the <\/span>radical uncertainty<\/span><\/b> which<\/span> characterizes the related risks.<\/span><\/p>\n Christine Lagarde <\/span><\/span>ignores the ECB\u2019s carbon bias<\/span><\/span><\/span><\/span><\/b><\/span><\/p>\n When talking about the ECB\u2019s asset purchases,<\/span><\/span> Lagarde <\/span><\/span>focuses on th<\/span><\/span>e purchases of <\/span><\/span>supposedly <\/span><\/span>\u201cgreen\u201d or \u201csustainable\u201d assets<\/span><\/span> but<\/span><\/span><\/strong>:<\/span><\/span><\/p>\n More importantly, <\/span>Lagarde forgets that its <\/span><\/b>asset purchases<\/b><\/a><\/span> and <\/span><\/b>collateral framework<\/b><\/a><\/span> are both skewed toward carbon intensive activities<\/span><\/b>. <\/span>Isabel Schnabel<\/a><\/span> and <\/span>Klaas<\/span> Knot<\/span><\/span><\/a> have <\/span>recognized the need to change the ECB<\/span>\u2019s<\/span> asset purchase benchmark and the <\/span>Bank of England<\/a><\/span> already announced that it would exclude big polluters from its own purchases <\/span>by<\/span> the end of 2021.<\/span> The ECB\u2019s carbon bias notably means that it<\/span> support<\/span>s<\/span> fossil fuel companies<\/a><\/span>, even when they are planning numerous <\/span>\n