FRANKFURT (Reuters) – The European Central Bank will tilt its purchases of corporate bonds towards companies that emit less carbon, giving each firm a score based on their past performance, future goals and climate disclosures.
Hoping to play a part in the fight against climate change, the ECB unveiled a host of measures from bank supervision to monetary policy last year, and favouring companies with a better climate performance is among its latest moves.
“One goal is to reduce the Eurosystem’s exposure to climate-related financial risk,” the ECB said in a statement. “Furthermore, these measures support the green transition of the economy in line with the EU’s climate neutrality objectives.”
The ECB will take a climate score developed by the bank into account in all corporate bond purchases from October, which will for now involve the reinvestment of cash maturing from existing bonds.
However, the bank will not sell bonds even if the issuer receives a low climate score and it also will not disclose the climate score assigned to each firm.
The ECB will look at each company’s past emissions and how these compare to peers. It will also consider objectives set by issuers to reduce their greenhouse gas emissions and will also look at the quality of climate related disclosures.
“The (ECB) will use the climate score to adjust its bids on the primary market to favour issuers with a better climate performance and to impose maturity limits on bonds from lower-scoring issuers,” the ECB added.
(Reporting By Francesco Canepa and Balazs Koranyi, Editing by William Maclean)
