The European Central Bank (ECB) announced that it will focus a greater proportion of its corporate bond purchases towards issuers with stronger climate performance, supporting the decarbonization of the Eurosystem’s €344 billion corporate bond portfolio.
The stronger green “tilt” was revealed as part of the details provided by the ECB of its plan to begin reducing its asset purchase programme holdings over the next few months.
The plan will be carried out by only partially reinvesting principal payments from maturing securities, and the ECB said that it has “decided on a stronger tilting of its corporate bond purchases towards issuers with a better climate performance during the period of partial reinvestment.”
Additionally, while the ECB said that it will phase out primary market purchases of securities, it will continue to purchase corporate issuers with a better climate performance and green corporate bonds in the primary market.
The ECB announced in July 2022 that it would begin incorporating climate change considerations into its monetary policy framework, with actions including the decarbonization of its portfolio of corporate bond holdings over time, and the introduction of climate-related disclosure requirements for collateral. In September, the central bank introduced climate scores that it would incorporate into future bond purchase decisions, and the process to tilt the ECB corporate bond portfolio to better climate performers began in October.
In a social media post following the central bank’s announcement, Irene Heemskerk, Head of the Climate Change Centre at the ECB, said:
“Tilting basically has the effect that we are buying more assets of companies with a better climate performance. We do this to reduce the climate-related risks and create incentives for companies to become more transparent about their climate risks and carbon footprint, as well as to reduce their green house gas emissions.”