European Central Bank investigating ways to incorporate ESG into portfolios – Draghi

The European Central has said it is looking at how it can incorporate environmental, social and governance (ESG) considerations into its non-monetary assets.

ECB President Mario Draghi, in a letter to MEPs, said the bank’s own pension funds “invest in a wide range of asset classes that allow for different approaches to incorporate” ESG.

He went on: “Further ways of incorporating ESG principles into the management of other ECB euro-denominated non-monetary policy portfolios are currently being investigated.”

And some Eurosystem central banks, Draghi said, are also examining, or have already introduced, methods of applying responsible investment to their non-monetary policy portfolios. The Eurosystem comprises the ECB and the 19 national central banks of the eurozone.

The letter was in response to MEPs Paul Tang, Neena Gill and Jonas Fernandez who had asked Draghi who had asked the bank what steps it had taken to integrate the Paris Agreement into its lending framework and assess the climate impact of its quantitative easing programme known as the Corporate Sector Purchase Programme (CSPP).Draghi’s reply was that the asset purchase programmes were purely guided by monetary policy objectives and sought to avoid “undue market distortions and level playing field concerns”.

So the purchases were “deliberately broadly defined and do not positively or negatively discriminate on the basis of the issuers’ economic activity, which is also why we have not conducted any specific climate impact assessment”.

“We have been helping to finance sustainable projects with our monetary policy portfolios”

But he added that the asset purchase programme included green bonds – meaning the initiative “does in fact contribute positively to the funding of climate-related projects” — which meant that “we have been helping to finance sustainable projects with our monetary policy portfolios”.

Draghi also welcomed the EU Action Plan on sustainable finance and said the ECB actively supports the proposed green taxonomy. The ECB had also recently joined the new Network for Greening the Financial System.