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On the path to Paris-alignment, the ECB starts disclosing climate impact of portfolios

On March 23, 2023, the European Central Bank (ECB) published its first set of climate-related financial disclosures. The disclosures provide information on the carbon footprints of the ECB's portfolio, its exposure to climate risks, and its climate-related governance, strategy, and risk management.

The main goal of the report is to enhance transparency in the Eurosystem's activities and contribute to ongoing efforts to address climate change. This work focuses on three primary objectives: managing and mitigating financial risks associated with climate change, promoting sustainable finance to support a transition to a low-carbon economy, and sharing the Eurosystem's expertise to encourage behavioral change.

The Eurosystem has disclosed its holdings in corporate securities arising from its Corporate Sector Purchasing Programme (CSPP) and Pandemic Emergency Purchase Programme (PEPP), as well as its own funds portfolio and staff pension fund in euro-denominated non-monetary policy portfolios (NMPPs).

The disclosures reveal that the corporate bonds held under the CSPP and PEPP are on a path toward decarbonization. While absolute greenhouse gas emissions of the portfolios have increased in recent years due to the Eurosystem's purchase of more securities for monetary policy purposes, the carbon intensity of issuers has gradually decreased.

A second factor contributing to the reduction of relative emissions associated with corporate sector purchases since October 2022 is the ECB's decision to tilt its holdings towards issuers with better climate performance. This approach is helping to decarbonize the Eurosystem's corporate sector portfolios in line with the goals of the Paris Agreement.

The disclosures also demonstrate that the ECB has reduced emissions from corporate and equity investments in its staff pension fund by more than 50% since 2019. These assets are already aligned with the Paris Agreement and low-carbon benchmarks, resulting in the reallocation of funds toward more carbon-efficient issuers and a solid decarbonization trajectory for the portfolio.

By releasing these disclosures, the Eurosystem is fulfilling one of the key commitments outlined in its climate change action plan.

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