In a bid to decarbonise its assets, the ECB said it will stop buying new bonds issued by private sector entities by March, except where corporate issuers have a strong environmental track record. It will also continue buying their green bonds, which fund environmentally-friendly projects, in the primary market.
The European Central Bank will favour bonds issued by greener companies as it starts running down its €5 trillion portfolio of bond holdings from March, it said on Thursday (2 February).
The ECB was laying out details after it announced in December it would run bonds off its balance sheet at an average pace of €15 billion per month from March through June.
The process is known as quantitative tightening, or QT.
The bank will also skew remaining corporate debt reinvestments “more strongly” towards companies with a better climate performance, enhancing a process it first started in October.
“The ECB have restated their commitment to a stronger tilting of their private sector holdings towards greener issuers,” said Jo Richardson, head of portfolio strategy at Anthropocene Fixed Income Institute, a sustainable finance think tank.
“They have been clear that their primary market interests will depend on the climate performance of issuers. As the largest buyer of corporate bonds, this will impact funding spreads for the high emitters.”
ECB President Christine Lagarde said on Thursday the bank would be attentive in order to ensure it doesn’t become an “accomplice” to so-called greenwashing, where borrowers exaggerate their green credentials...
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