ECB under pressure from MEPs to assess climate impact of QE

The European Central Bank (ECB) is under political pressure from the European Parliament to integrate the Paris Agreement into its lending framework and assess the climate impact of its quantitative easing programme that observers say is heavily skewed to carbon-intensive companies. Dubbed the Corporate Sector Purchase Programme (CSPP), the €140bn initiative, that began in 2016, is partly a drive by the ECB to address the lack of bank lending in the real economy by purchasing Eurozone corporate bonds. But, Dutch Labour MEP Paul Tang, UK Labour MEP Neena Gill and Spanish Socialist Workers’ Party MEP Jonas Fernandez have written a letter to the ECB saying that the climate impacts of the CSPP need to be assessed.
The MEPs, members of the European Parliament’s Committee on Economic and Monetary Affairs, cite research from the Grantham Research Institute on Climate Change and the Environment that finds 62.1% of the ECB’s corporate bond purchases take place in sectors responsible for 58.5% of Eurozone greenhouse gas emissions. The Grantham Institute concludes the ECB’s activities “may be unintentionally reinforcing the status quo” and lead to a “green investment gap”.
At the last ‘Monetary Dialogue’ between ECON and the ECB, Tang pressed ECB president Mario Draghi on the environmental impact of the ECB’s €140bn corporate bond purchasing activity. In the meeting, Draghi said “the ECB is party to the Paris Agreement” and “recognises the challenge posed by climate change and the importance of policies aimed at addressing it”. He also welcomed the report of the High-Level Expert Group on Sustainable Finance.
But Tang and other fellow MEPs do not think this answer is sufficient and have written to the ECB for further clarification.NGO Positive Money Europe has been supporting MEPs in scrutinising the activities of the ECB and helped with the letter. In a recent policy briefing it looked at the role of the ECB’s asset purchases for sustainable finance. Stanislas Jourdan, Head of Positive Money Europe, said: “The ECB has recognised it is legally bound by the Paris agreement, yet has done close to nothing until now. In fact, the Corporate Bond Purchase Programme is a clear example of how the ECB’s monetary policy is at odds with the climate goals of the EU. The MEPs’ demand for an analysis of the carbon impact of monetary policy is very modest and sensible. We hope the ECB take this opportunity to raise its game and take a pro-active role in shaping a sustainable finance system.” A spokesman for the ECB says it will answer the MEPs question on climate impacts in due course.
Last year, RI revealed that the ECB had held meetings with banking giant HSBC and asset manager Amundi on portfolio decarbonisation. But the nature and substance of the discussions have not been revealed. An ECB employee attended an event last year convened by the Council on Economic Policies focused on central banks and green finance. Along with individual MEP pressure, the ECB could face a push from the majority of the European Parliament on the climate impacts of its monetary policy as part of a forthcoming report on sustainable finance. The European Parliament Report on Sustainable Finance is currently being debated by MEPs. The current draft of amendments includes a motion for the ECB to align its purchase programme with the Paris Agreement and ESG goals. However there has been some push back from Liberal MEPs who want the motion removed.