The ECB has long said that the fight against climate change is crucial in maintaining financial stability and its bank supervision arm has been pushing the bloc's biggest lenders to improve risk management and disclosure.
The ECB said that starting from October 2022, it will tilt reinvestments of cash maturing from corporate debt towards firms with lower greenhouse gas emissions, more ambitious carbon reduction targets and better climate related disclosures.
The ECB bought corporate debt for much of the past decade as part of its ultra-easy monetary policy and while new purchases have already ended, cash from maturing bonds will be reinvested back into the market indefinitely. The ECB will, however, not exclude any company from its investment portfolio, hoping to give the big polluters an incentive.
In making actual investment decisions, the ECB will look at firms' past performance, their planned carbon reduction targets, and data publicly disclosed.
The ECB will only rely on publicly available information and will not disclose which holdings it cut or increased. Further out, the ECB also plans to limit the share of assets issued by high polluters that can be pledged as collateral by banks when borrowing funds from the central bank, Reuters concluded.
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