The ECB has recently used significant climate language, such as a commitment to adapt their portfolio in H2 2022, and also has the biggest exposure to less climate-aligned bonds among all major central banks through the CSPP. Our analysis shows that the CO2 exposure in the CSPP portfolio is quite concentrated, and we believe investors should pre-position for a front-loaded sell-off in such bonds, were the ECB to start applying a green focus in its monetary policy toolkit.
Given this alongside a general low capacity of bond markets to assimilate large offers, we recommend investors to be vigilant on exposures to the EUR bonds of the highest carbon emitters in the CSPP portfolio, such as Shell, BP, Total, Glencore and ENI, indeed some of which are not even based in the Eurozone. Going into H2 2022 we expect the ECB to start selling bonds with a climate focus.
