On February 11, Governor <\/span><\/b>Villeroy<\/span><\/b> developed the Banque de France’s proposals for integrating climate issues into the work of the European Central Bank (ECB). On the agenda<\/span><\/b>:<\/span><\/b> the recognition of the need to revise the principle of market neutrality and to initiate the decarbonation of all central bank operations<\/span><\/b>; <\/span><\/b>but <\/span><\/b>also<\/span><\/b> proposals too vague<\/span><\/b>,<\/span><\/b> incomplete<\/span><\/b> <\/b>and, above all, <\/span><\/b>late to have a real impact<\/span><\/b>. <\/span><\/b>We decode this refe<\/span><\/b>rence<\/span><\/b> <\/b>speech<\/a><\/u><\/span><\/b>. <\/span><\/b><\/p>\n A seemingly positive dynamic <\/span><\/b><\/p>\n As the debate<\/a><\/u> <\/span>around the role of the ECB in the face of climate change <\/span>rages, the Governor of the Banque de France recognizes <\/span>straightaway<\/span> the need <\/span>for an in-de<\/span>p<\/span>th review<\/span> of<\/span> ECB operations. He<\/span> thus <\/span>joins Christine Lagarde<\/a><\/u>, Isabel Schnabel<\/a><\/u>, <\/span>Olli <\/u><\/span>Rehn<\/u><\/span><\/a> and <\/span>Klaas<\/u><\/span> Knot<\/u><\/span><\/a> in taking a stand <\/b><\/span>in favor of the<\/span> revision of <\/span>the <\/span>\u201c<\/span>market neutrality<\/a><\/u><\/span>\u201d<\/span> principle<\/span><\/b>, which<\/span> he says<\/span> should not <\/span>\u00ab\u00a0b<\/span>lock<\/span> carbon neutrality\u00a0\u00bb. <\/span><\/p>\n T<\/span>he Governor suggests decarbonising all ECB operations<\/b>. He indicates that he wants to start with \u00ab\u00a0all corporate assets, whether they are held on the central bank’s balance sheet<\/span> or taken as collateral\u00a0\u00bb. <\/span><\/p>\n But, if the dynamic described by the Governor seem<\/span>s<\/span> positive, the calendar he puts forward is more than worrying. <\/span><\/p>\n Waiting <\/span><\/b>3 to 5 years <\/span><\/b><\/p>\n I<\/span>n fact<\/span>, as he had done several times <\/span>in the past<\/span>, the Governor stressed that the ECB <\/span>should<\/span> decide on the measures to be taken by the end of the year in order to implement them<\/b> <\/span>within<\/span>..<\/span><\/b> \u00ab\u00a03 to 5 years\u00a0\u00bb!<\/b> <\/span><\/p>\n This deadline totally ignores the climate emergency: while we only have a few years<\/a><\/u> to limit global warming, the ECB will release 5 trillion euros in 2020-2022 without any environmental or climate conditions<\/b>, thus supporting the most polluting activities<\/a><\/u>. <\/span><\/p>\n Moreover, even if the Governor’s proposals were to be implemented immediately, they would be insufficient to make a significant contribution to the fight against climate change and t<\/span>o<\/span> mitigat<\/span>e<\/span> the<\/span> related risks. <\/span><\/p>\n The most polluting companies preserved <\/span><\/b><\/p>\n The Governor’s proposed monetary policy measures consist <\/span>in<\/span><\/b> using climate risk to:<\/b> <\/span><\/p>\n These two proposals do not exclude the assets of the most polluting companies<\/b>.\u202fEven when companies do not meet th<\/span>ese<\/span> criteria, their assets w<\/span>ould<\/span> still be accepted as collateral and purchased by the ECB. The only change<\/span> is that<\/span> the conditions under which these assets w<\/span>ould<\/span> be selected<\/span> w<\/span>ould<\/span> be less favorable. <\/span><\/p>\n Moreover, these proposals make climate risks an additional criterion to be considered alongside other criteria, and not the only selection criterion. Unless corporate investments (capex) are studied in detail, large highly polluting companies that are considered financially sound would only be marginally impacted, even when <\/span>investing<\/span> in projects that are incompatible with the remaining carbon budget. <\/span><\/p>\n The use of climate risk involves modeling its financial materiality before being able to act. However, the \u00ab\u00a0radical uncertainty<\/a><\/u>\u00a0\u00bb that characterizes climate risk makes it particularly complex, if not impossible, to obtain such models.<\/span><\/p>\n The Governor is aware of this problem. He wishes to take \u00ab\u00a0climate alignment\u00a0\u00bb as a \u00ab\u00a0proxy\u00a0\u00bb for climate risk<\/b><\/span>s<\/span>, pending s<\/span>atisfactory<\/span> measurement of it. <\/span>However<\/span>, the <\/b><\/span>Governor<\/span>\u2019s<\/span> de<\/span>finition<\/span> of<\/span> \u00ab\u00a0<\/span>climate<\/span> alignment<\/span>\u00a0\u00bb <\/span>is<\/span> problematic<\/span>:<\/span> <\/b><\/p>\n Forgetting refinancing operations <\/span><\/b><\/p>\n Beyond the <\/span>above-described <\/span>shortcomings, the Governor leaves aside an important question: how can the ECB contribute to the financing of the alternatives necessary for the European transition?<\/b> <\/span>The aim here is to contribute to local sustainable development, to reconcile environmental protection and social benefits.<\/span><\/p>\n\n
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