An ECB Rapid Decarbonisation Plan

4 minute read

Just 30 bond issuers derived by our proposed High-Level Excessive Emissions Grouping (HLE2G) framework and who sit in the ECB's eligible market asset list have a combined carbon footprint of 3.5 gigatonnes of CO2. Decarbonisation of the ECB's exposures could be quick and straightforward. If implemented, the HLE2G could de-risk and decarbonise the ECB’s portfolio and withdraw funding support to what could potentially be more climate risk sensitive issuers. We have calculated that these issuers have a CO2 footprint of around 3.5GT per annum. For the European Union’s total CO2 emissions, this corresponds to a rough equivalent of 80%.

Our proposal follows comments from the ECB that central banks should review their bond portfolios and other operations with regards to climate change. The advantages of HLE2G are that it is easy to implement, has an economical approach and has complementary characteristics to the green definition in the forthcoming EU Green Taxonomy.

Most of the highlighted issuers are traded in the main European credit indices, which indicates relevance to the credit market. The proposal has been generated through the ECB’s own disclosure of credit risk holdings as per the eligible marketable asset list, and our own overlay from public information sources.