The two key takeaways are as follows. First, the ECB will switch from a flow to a stock implementation approach to climate management of its portfolio(s). Note that the stock approach will also be implemented in covered bond and asset-backed securities portfolios. The implications of this in terms of valuation of carbon intensive versus less carbon intensive bonds could be significant. Second, the ECB will tilt public sector bond holdings toward green bonds, either by switching from government curves to SSAs, or from government grey bonds to government green bonds (where there is enough volume to do so).
