The European Central Bank unveiled a first set of climate-related statistical indicators to better monitor the impact of global warming on the financial sector and to track developments in sustainable and green finance.
(Bloomberg) — The European Central Bank unveiled a first set of climate-related statistical indicators to better monitor the impact of global warming on the financial sector and to track developments in sustainable and green finance.
The new gauges are either experimental or analytical, the ECB said on Tuesday. It cautioned that the former comply with “many, but not all” of its standards. The analytical measures meanwhile have a lower quality and “certain – sometimes significant – limitations.”
“The indicators are a first step to help narrow the climate-data gap, which is crucial to make further progress toward a climate-neutral economy,” Executive Board member Isabel Schnabel said in the statement. “We need a better understanding of how climate change will affect the financial sector, and vice versa. For this, the development of high-quality data is key.”
The statistics are a milestone for the ECB’s plan to incorporate climate-change considerations into its policy framework. It outlined that ambition last July and in October, it started tilting reinvestments of maturing corporate bonds toward issuers with a greener footprint.
Schnabel has floated further major steps. In a speech this month, she suggested the ECB may need to start actively reshuffling these bond holdings to better reflect climate risk.
She also argued that any attempt to green the ECB’s debt portfolio needs to include sovereign bonds and identified tailored targeted lending operations as a potential future instrument that could be considered when policy needs to become expansionary again.
Under President Christine Lagarde, the ECB has refocused efforts on how to contribute to the fight against global warming and to start a broader conversation on improving the observation of climate-related risks and the green transition.
The new indicators are built on publicly available data where possible to ensure they’re accessible and replicable, the ECB said. They cover three areas:
- Experimental indicators on sustainable finance offering an overview of debt labeled as green, social or sustainable
- Analytical indicators on carbon emissions financed by financial institutions providing details on the carbon intensity of securities and loan portfolios
- Analytical indicators on climate-related physical risks analyzing the impact of natural hazards on the performance of loans, bonds and equities portfolios
The data show the volume of sustainable and green bonds in the euro area has more than doubled over the past two years and has grown much faster than the overall bond market, the ECB said.
They also find that most of the emissions financed by equity or bonds are held by investment funds, while the most carbon-intensive activities financed via bank lending.
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