Article: The ECB’s Decarbonization Plan for Corporate Bonds

Abstract

This article explores the European Central Bank’s (ECB) pioneering approach to incorporating climate considerations into its monetary policy operations, using a climate scoring model. The ECB aims to reduce climate-related financial risks and encourage greener practices. The background section discusses the post-2015 Paris Agreement context and the ECB’s Climate Agenda, while highlighting the controversies surrounding its quantitative easing programs.The core of the article examines the ECB’s decarbonization strategy for corporate bonds, which involves a scoring model based on three sub-scores: backward-looking emissions, forward-looking targets, and climate reporting/disclosure. This model is expected to incentivize companies to reduce their carbon footprint and improve disclosures.The article concludes by emphasizing the ECB’s commitment to climate change mitigation but suggests a broader need for a reevaluation of the monetary system to prioritize public interest and address pressing global issues more effectively. Bonds, ECB, decarbonization, Climate Agenda, Eurosystem, climate scoring, monetary policy