ECB to Adjust Corporate Bond Holdings to Reflect Climate Risk

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The European Central Bank plans to rejig its corporate bond portfolio to favor issuers that pollute less, marking its most significant shift yet to weave environmental considerations into monetary policy.

The ECB will reinvest “the sizeable redemptions expected over the coming years” in a way that penalizes companies with a big carbon footprint, according to a statement on Monday. The new plan will affect some 30 billion euros ($31.3 billion) worth of reinvestments each year, or around 10% of the ECB’s corporate portfolio, Executive Board member Isabel Schnabel said.

“If you compare it to other central banks, this is a substantial amount, so this makes a difference,” she said.

The ECB is adjusting a cornerstone of its toolbox amid a growing sense of anxiety that time is running out to address the threat posed by global warming. The United Nations Intergovernmental Panel on Climate Change has estimated that the planet might be on track for temperature increases that could be twice the limit set out in the Paris climate accord.