ECB Reports 35% Emissions Reduction in €367 Billion Corporate Bond Portfolio
The European Central Bank (ECB) announced today the publication of a new set of climate-related financial disclosures, providing information on the carbon footprint of its portfolios and their exposure to climate risks, indicating that the carbon intensity of its €367 corporate bond portfolio has declined by 35% from 2021 to 2023.
The report marks the second set of climate-related disclosures from the ECB, following the central bank’s launch in 2021 of its climate action plan, which included a pledge to increase climate-related transparency, as well as initiatives to further incorporate climate change considerations into its monetary policy framework, to enhance its risk assessment tools and capabilities to better include climate-related risks, and to improve the external assessment of climate risks.
The ECB also announced in 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.
According to the new report, the carbon intensity of the Eurosystem corporate bond portfolio has declined significantly over the past few years, with tonnes of CO2 per millions of Euro of revenue falling by more than 35% between 2021 and 2023 to 172 tCO₂e.
The ECB noted that most of the decline in emissions has been due to securities issuers becoming more carbon-efficient, while approximately one fifth of the reduction in 2022 and 2023 was due to efforts to tilt reinvestments towards issuers with better climate performance. Over time, the tilting initiative is likely to increase its contributions to portfolio decarbonization, with the ECB noting that the emissions intensity of its purchases in 2023 declined 70% compared to the year prior to the implementation of the tilting framework.
The report also indicated a significant expansion in emissions disclosure on the Eurosystem’s assets held for monetary policy purposes, with disclosure now covering 99.7% of assets. Additionally, the ECB’s Governing Council has agreed to set interim emissions reduction targets for the Eurosystem’s corporate holdings, which will initially be used to monitor the portfolios’ emissions trajectory, with potential remedial actions to be assessed if deviations from the desired trajectory are identified.
In the report, ECB President Christine Lagarde said:
“The Eurosystem remains committed to improving the quality of our disclosures in line with improvements in climate-related data and regulation. Within our mandate, we will also continue to reduce the carbon footprint of our corporate portfolios on a path that supports the goals of the Paris Agreement. However, we cannot effect change alone.
“To reduce the carbon footprint of our portfolio, in particular for public sector assets, we depend on issuers delivering on commitments to lower their associated emissions. Ultimately, action needs to be taken at issuer level for the economy to decarbonise. This is what matters most to put the world on track towards net zero carbon emissions.”