Euro central banks to commence TCFD disclosures for investment portfolios

The ‘common stance’ has been adopted by the EU’s 19 central banks and European Central Bank

The European Central Bank and the 19 national central banks of the Eurosystem will start making annual reports of the climate performance of their investment portfolios within the next two years, using the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) as the initial framework.

The policy will apply to the supervisory institutions’s Euro-denominated non-monetary policy portfolios, which include investment portfolios and staff pension funds.

The new ‘common stance’, which was announced yesterday, will lay the foundation for more comprehensive reporting of greenhouse gas emissions and other sustainable and responsible investment-related metrics of these portfolios in the future.

According to the ECB, the move comes after “extensive preparatory work” within the Eurosystem and is in line with recommendations made by green central banking group the Network for Greening the Financial System.

The ECB first indicated that it was looking into integrating ESG considerations in its non-monetary policy investments in 2018 under the leadership of then-President Mario Draghi.

Eurosystem central banks are solely responsible for managing their non-monetary investment portfolios, however several – including the ECB – already apply sustainable investment policies. 

Last week, the ECB and the central banks of Spain and Portugal announced their participation in a new green bond fund launched by the Bank of Intentional Settlements. The ECB has also adopted low-carbon equity benchmarks and currently holds green bonds amounting to 3.5% of its €20.8bn funds portfolio.

The ECB’s announcement was welcomed by the Central Bank of Ireland and the German Bundesbank. Jens Weidmann, Bundesbank President, confirmed in a statement that the bank would begin making climate-related disclosures by mid-2022, half a year before the agreed deadline to do so.

"The Bundesbank is already working on incorporating these principles into its investment processes and reporting,” he said. The Bundesbank's non-monetary policy euro portfolio is invested exclusively in covered bonds