The European Central Bank on Tuesday hinted it could make its monetary policy greener as part of a new push to take climate change into account in its work.
Some activists have been calling for years for the ECB to attach climate targets to its long-term loans to banks and stop buying the bonds of polluting companies.
Such stimulus tools have been shelved over the past two years as the ECB turned its focus to fighting inflation, but in a release setting out its 2024-25 climate and nature plan on Tuesday the bank suggested this might change in the future.
“The ECB will explore, within its mandate, the case for further changes to its monetary policy instruments and portfolios in view of this transition,” the ECB said without providing any detail.
The central bank for the 20 countries that share the euro had previously applied a green “tilt” to reinvesting proceeds from one of its main portfolio of bonds, but this came to a standstill as part of the inflation fight.
Presenting the climate plan, ECB board member Frank Elderson said this tilting framework, which has been criticized as too timid by some analysts, had achieved its goals and would remain in place.
He added, however, that offering subsidized credit to banks in return for green lending presented several issues, such as identifying the right borrowers. Last year the European Union set out new standards for companies issuing “green” bonds.
More radical changes may prove divisive. While these initiatives have been championed by Elderson and fellow board member Isabel Schnabel, other policy-makers such as Belgium’s Pierre Wunsch are skeptical, arguing it is for governments to fight climate change.
The U.S. Federal Reserve too is coming under pressure to consider climate change in its own policy, analysis and research.
Other aspects of the ECB’s 2024-25 climate plan will include more analysis of the green transition, and of the impact of extreme weather events on inflation and the financial system, it said.