The ECB has unveiled its latest climate-related financial disclosures, shedding light on the reduction of carbon emissions in Eurosystem corporate sector portfolios.
The findings highlight an encouraging trend of issuers enhancing their carbon efficiency, which has largely driven the downward trajectory of emissions. Notably, approximately 20% of the emissions reduction in 2022 and 2023 can be attributed directly to the Eurosystem’s strategic reinvestment practices, focusing on issuers with superior climate performance.
Further commitments by the ECB include the implementation of interim emission reduction targets for the corporate sector portfolios within its asset purchase programme (APP) and pandemic emergency purchase programme (PEPP). These targets will reflect the guidelines set forth by the EU Benchmarks Regulation and are intended for internal use to ensure portfolios remain on track with emission reduction goals. Should any deviations occur, the Governing Council will consider necessary corrective measures within their mandate.
This year’s climate disclosures have expanded to include not just corporate sector assets, but also Eurosystem holdings of public sector assets, covered bonds under the APP and the PEPP, and the ECB’s foreign reserves, covering 99.7% of total assets held for monetary policy purposes. Data indicates that emissions from these assets are also on a decline, congruent with ongoing decarbonisation efforts.
The ECB’s non-monetary policy portfolios, which include investments from the ECB staff pension fund and the ECB’s own funds, are also moving towards sustainability. Investments in the ECB staff pension fund now align with EU Paris-aligned Benchmarks, which saw a 50% reduction in emissions in 2023 compared to the previous year. The ECB aims to continue reducing these emissions by at least 7% annually. Additionally, the allocation of green bonds in the ECB’s own funds has increased significantly, from 13% in 2022 to 20% in 2023, providing over €4.5bn in green transition funding, with plans to increase this to 25% by 2024.
“The information provided in our climate-related financial disclosures aims to set a precedent for transparency and aid regulatory and stakeholder efforts in enhancing climate data reporting,” ECB Governing Council said.
As the ECB moves forward, it remains committed to aligning its disclosure practices with evolving climate-related data standards and continuing its support for the objectives of the Paris Agreement through strategic portfolio management.
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