The European Central Bank (ECB) has decided to use part of its own funds portfolio to invest in the euro-denominated green bond investment fund for central banks (EUR BISIP G2) introduced by the Bank for International Settlements (BIS). With this investment, the ECB contributes, within its mandate, to global efforts to promote environmental objectives – including the EU climate goals – and to combat climate change. The BIS green bond fund invests in renewable energy production, energy efficiency and other environmentally friendly projects.
Such investment complements direct purchases of green bonds in secondary markets. The ECB already holds green bonds amounting to 3.5% of its own funds portfolio, which has a total market value of €20.8 billion. The ECB plans to increase this share over the coming years.
The EUR BISIP G2 is part of the BIS’s green bond fund initiative, which helps central banks to incorporate environmental sustainability objectives in the management of their reserves and capital. In September 2019, the BIS launched a US-dollar-denominated green bond fund under the same initiative.
Besides, ECB has decided to set up a climate change centre to bring together the work on climate issues in different parts of the bank. This decision reflects the growing importance of climate change for the economy and the ECB’s policy, as well as the need for a more structured approach to strategic planning and coordination.
The new unit, which will consist of about ten staff working with existing teams across the bank, will report to the ECB’s President, Christine Lagarde, who oversees the ECB’s work on climate change and sustainable finance.
The climate change centre will shape and steer the ECB’s climate agenda internally and externally, building on the expertise of all teams already working on climate-related topics. Its activities will be organised in workstreams, ranging from monetary policy to prudential functions, and supported by staff that have data and climate change expertise. The climate change centre will start its work in early 2021.
The new structure will be reviewed after three years, as the aim is to ultimately incorporate climate considerations into the routine business of the ECB.