The European Central Bank (ECB) announced 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 €331 billion (USD$380 million) corporate bond portfolio has declined by 38% from 2021 to 2024.
Alongside the disclosures, the ECB revealed that it has set a new climate goal for its corporate portfolio holdings in the asset purchase programme (APP) and the pandemic emergency purchase programme (PEPP), targeting an emissions intensity reduction of 7% on average per year.
According to the ECB, the new target is aimed at keeping its holdings on a path that supports the goals of the Paris Agreement and EU climate neutrality objectives.
The report marks the third 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 report, the carbon footprint of the Eurosystem corporate bond portfolio has declined significantly over the past few years, with weighted average carbon intensity (WACI) falling 38% to 165 tCO₂e/EUR million in 2024 from 266 tCO₂e/EUR million in 2021.
While the ECB’s initiative to tilt investments to better climate performers contributed significantly to its reduced portfolio carbon footprint, these actions accounted for around 26% of the WACI reduction through 2024, with emissions reductions at issuers accounting for most of the decline. Tilting also slowed significantly following and ECB decision to discontinue reinvestment, although the central bank noted that the scope 1 and 2 WACI of purchases conducted in 2024 declined by 76% compared with the year prior to the implementation of the tilting framework.
The ECB also announced the introduction of a new metric, measuring the exposure of the ECB’s and the Eurosystem’s corporate portfolios to sectors with material dependencies or impacts on nature. According to the new metric, approximately 30% of the Eurosystem’s monetary policy corporate bond holdings are concentrated in the three most exposed sectors, including utilities, food and real estate.
In the new report, ECB President Christine Lagarde said:
“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.”
