ECB considers favouring green bonds

The European Central Bank is looking for opportunities to do more in the fight against climate change. That‘s what Frank Elderson, Executive Board Member of the ECB says in an interview with News Hour. โ€œWithin our mandate, we have to do everything we can in terms of climate. This applies to all players in society, as well as central banks and regulators.โ€

One of the options that central bankers in Frankfurt are exploring is whether they can lead green bonds in their buyout programs. โ€œCan we shift a little towards green? Is that allowed or not?โ€ Elderson said. โ€œI think there’s room to do that.โ€ That statement is special. The ECB still buys tens of billions of state and corporate bonds on a monthly basis.

The bank does that in a way that should not interfere with the market. That‘s called ‘market neutral‘. As a result, the bank has billions of ‘dirty‘ bonds from, for example, oil and gas companies on the balance sheet. If the European Central Bank finds a way to advance green bonds over dirty ones, it would be a big step.

Frank Elderson says they are seriously looking at the ECB to what extent it is possible to prioritize ‘green bonds‘:

Previously, ECB President Christine Lagarde said it โ€œis an important signal to the market if the ECB screws up the purchase of green bonds.โ€ Elderson takes his statement that he thinks this can actually be one step further. According to the ECB Executive Board member, the exact elaboration takes at least half a year to come. โ€œIt’s really complicated. So I can‘t make a final ruling on it.โ€

Mapping climate change financial risks

The European Central Bank has two tasks: ensuring price stability in the 19 Eurozone countries and overseeing the banks. Elderson (51), in his previous position as board member of the Nederlandsche Bank, focused on more attention to the consequences of climate change. He takes office in Frankfurt at a time when there is a full debate on the role that the ECB can and should play in the climate crisis. โ€œClimate policy is up to governments, not us. But within the borders, we are looking for ways to make the best possible contribution. You can rest assured that I am very motivated.โ€

There is also criticism of the new role that the ECB attracts. Why do unelected officials in Frankfurt have to deal with climate change? Elderson acknowledges that there are limits to what the ECB can do, but still sees a role for himself and his colleagues.

With today’s climate policy, the world is heading towards 2.7 degrees Celsius warming in 2100. โ€œThat means a large amount of more climate misery is coming to us. We look at how that translates to the risks to the banks we oversee. It has now become no longer controversial among regulators that climate change and the response of governments lead to financial risks. We need to map it out.โ€