The European Central Bank (ECB) has released its latest climate-related financial disclosures, illuminating the carbon footprint and climate risks associated with its portfolios. Notably, the carbon intensity of its €331 billion corporate bond portfolio has decreased by 38% between 2021 and 2024. This development is significant as it aligns with the ECB’s commitment to supporting environmental goals.
The ECB has also set a new climate target for its corporate portfolio holdings under the asset purchase programme (APP) and the pandemic emergency purchase programme (PEPP), aiming for an annual emissions intensity reduction of 7%. This objective seeks to maintain alignment with the Paris Agreement and the EU’s climate neutrality targets.
This report represents the ECB’s third set of climate-related disclosures, following the initiation of its climate action plan in 2021. This plan included commitments to enhance transparency, integrate climate considerations into monetary policy, improve risk assessment tools, and facilitate better external evaluations of climate risks.
In 2022, the ECB announced its intention to incorporate climate change into its monetary policy framework. This included efforts to decarbonise its corporate bond portfolio over time and implement climate-related disclosure requirements for collateral.
According to the report, the Eurosystem corporate bond portfolio’s carbon footprint has significantly reduced, with the weighted average carbon intensity (WACI) dropping by 38% from 266 tCO₂e/EUR million in 2021 to 165 tCO₂e/EUR million in 2024. Although the ECB’s strategy to favour investments in better climate performers has notably reduced the portfolio’s carbon footprint, much of the decline is attributed to emissions reductions by issuers. The ECB highlighted that the scope 1 and 2 WACI of purchases made in 2024 decreased by 76% compared to the period before implementing the tilting framework.
The ECB has introduced a new metric to assess the exposure of its corporate portfolios to sectors with significant nature dependencies or impacts. About 30% of the Eurosystem’s monetary policy corporate bond holdings are concentrated in highly exposed sectors such as utilities, food, and real estate.
Christine Lagarde, President of the ECB, remarked: “Building strategic resilience and tackling climate change go hand in hand – and the future of Europe and the rest of the world crucially hinges on the success of our collective effort to reduce carbon emissions. At the ECB, we take climate change into account when pursuing our mandate. To meet our primary objective of keeping prices stable, we need to understand how climate change, nature degradation and the green transition affect the economy, and to manage the accompanying risks.”
