The European Central Bank plans to rejig its corporate bond portfolio to favor issuers that pollute less, marking its most significant shift yet to weave environmental considerations into monetary policy.
The ECB will reinvest “the sizeable redemptions expected over the coming years” in a way that penalizes companies with a big carbon footprint, according to a statement on Monday. The new plan will affect some 30 billion euros worth of reinvestments each year, or around 10 per cent of the ECB’s corporate portfolio, Executive Board member Isabel Schnabel said.
Meanwhile, the ECB has faced repeated criticism from environmental activists, who point to its holdings of carbon-heavy companies, such as Shell Plc, Eni SpA, and TotalEnergies SE. And policy makers were eager to show that the planned “tilt” in the ECB’s bond holdings will be a gradual process for the issuers affected.
The measure is expected to apply before the end of 2024, if necessary technical preconditions are in place. The Eurosystem will only accept marketable assets and credit claims from companies and debtors that comply with the Corporate Sustainability Reporting Directive as collateral, once the directive is fully implemented
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