ECB may take “remedial action” against firms failing to meet emissions reduction targets
The European Central Bank (ECB) plans to set emissions reduction targets for the corporate sector portfolios in the asset purchase programme (APP) and pandemic emergency purchase programme (PEPP). It said it could take “remedial action” if the companies fail to comply.
In its second set of climate-related financial disclosures, the bank said that by reducing the emissions of its corporate bond holdings, the Eurosystem aims to mitigate the financial risks associated with climate change within its monetary policy operations.
Eurosystem comprises the European Central Bank and the national central banks of the Member States whose currency is the euro.
It also aims to align its holdings with the goals of the Paris Agreement and the EU’s climate neutrality objectives. This approach sets a decarbonization trajectory consistent with limiting global warming to well below 2° Celsius while striving to limit it to 1.5° Celsius.
These interim targets will consider the requirements of the EU Benchmarks Regulation and the accompanying Commission Delegated Regulation as guidance. At this stage, these targets will be used internally to monitor the emission reduction trajectory of the corporate portfolios.
Read more: ECB warns euro banks on falling behind climate goals, threatens fines
The bank also added that several factors outside the Eurosystem’s control influence the expected decarbonization trajectory of corporate bond holdings.
These include the effectiveness of issuers in reducing their emissions as outlined in their plans, the conditions of the corporate bond market, and corporate bond issuance patterns.
Additionally, it emphasized that the annual publication of the portfolios’ climate-related disclosures will continue to ensure high transparency and accountability towards the public.
The report also shows that the carbon emissions associated with the Eurosystem’s corporate sector portfolios have declined, primarily due to issuers becoming more carbon-efficient.
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