The European Parliament has called on the European Central Bank (ECB) to investigate the impact of its monetary policy on climate change and to study the role of banking supervision in tackling the climate crisis.
The move comes as part of the European Parliament’s scrutiny powers where MEPs annually vote on a resolution assessing the ECB’s policies and activities. The process also includes recommendations and requests of the ECB.
Today, the European Parliament adopted by a large majority the latest ECB resolution or so-called “Annual Report” that for the first time includes the topic of climate change.
The adopted resolution on the Annual Report calls on the ECB to implement ESG principles into its policies, and research as a priority how banking supervision can contribute to the fight against climate change.
"This work is very positive and timely because it creates the political and intellectual room for the ECB to really go to the heart of the issue"
It also calls on the ECB to study the impact of its monetary policy on climate change drawing on research that finds the ECB’s quantitative easing (QE) programme is heavily exposed to carbon-intensive companies.
The research, from NGO Positive money Europe and think tank Veblen, finds that nearly 63% of the corporate bond purchasing part of the QE programme has been invested in the four sectors that contribute the most to global warning: fossil fuel extraction and distribution; the automotive sector; the most energy intensive industries; and electricity generation.
Commenting on today’s vote, Stanislas Jourdan, Executive Director, Positive Money Europe, said: “Thanks to this vote we have support from both sides of the political spectrum that the ECB has a role to play with climate change. It means the conversation can now move on to what criteria can be used in this respect in term of monetary policy design. This work is very positive and timely because it creates the political and intellectual room for the ECB to really go to the heart of the issue.”
The resolution says the ECB should coordinate with the European Investment Bank as a preliminary step to redesigning its QE programme in a sustainable manner.
The resolution, backed by 452 MEPs with 142 against and 53 abstentions, is advisory but traditionally the ECB responds in its annual report in Spring.
Yesterday, ECB President Christine Lagarde answered questions from the European Parliament on the draft Annual Report where she reiterated her support for climate change action by the ECB.
Federal Reserve chair Jerome Powell was also grilled by politicians yesterday on climate change during a testimony to the US House Committee on Financial Services.
Powell said the central bank was in the early stages of looking at climate change, describing it as a “very important issue”.
A few weeks ago, Powell said the Fed was looking into joining central banking body Network for Greening the Financial System (NGFS).