Until now the European Central Bank has been closely tied to the fossil economy. But the new climate plan announced by Christine Lagarde gives cause for optimism.
"We have recognised that climate change is an essential challenge for the world, and is of strategic importance for the mandate of the European Central Bank." These words from president Christine Lagarde were greeted with jubilation by environmental organisations. Because they finally seem to herald the long-awaited turning point for the ECB, which remains too closely tied to the world of fossil fuels.
The role of the European Central Bank is to manage monetary policy in the euro area, keep prices stable and guarantee the soundness of the banking system. It therefore provides liquidity to private banks in exchange for guarantees, known as collateral. This is where the first enormous environmental problem arises: among this collateral are the bonds of around sixty oil&gas companies, with a total value that Greenpeace has estimated at 300 billion euros.
Greenpeace also scrutinised the corporate bonds that the ECB purchased between mid-March and mid-May 2020, to prop up an economy put under severe strain by the health emergency. Of a total of 30 billion euros, 7.6 billion concerned companies active in the fossil fuels sector. In doing so, the institution contributed to the release into the atmosphere of 11.2 million tonnes of CO2, the equivalent of Luxembourg's annual emissions.
With the new action plan announced on 8 July, the European Central Bank promises to change course and "further incorporate climate change considerations into its monetary policy framework". This means, for example, also making environmental sustainability a mandatory criterion for a security to be accepted as collateral. Or purchasing corporate bonds only from companies in line with European legislation implementing the Paris Agreement on climate. Thus ironing out the paradoxes denounced by Greenpeace. The ECB also promises to monitor the implications that climate will have on the economic and financial system, and to subject banks to climate stress tests from 2022.
"Today's news is a victory for the climate justice movement and for the 165,000 people who signed a petition calling for an end to fossil fuel financing, mobilising for more than a year to put the climate crisis at the top of the ECB's agenda," says Julia Krzyszkowska, activist with 350.org. "The ECB is sending a clear signal: the era of fossil fuels is rapidly drawing to a close. For private banks and investors, the time has now come to keep pace with urgency and cut every tie with the toxic coal, oil and gas industry." The NGO nonetheless promises to keep watch, because this action plan is only a first step that will need to be followed by concrete and courageous policies.
