ECB’s Schnabel wants bond-buying green tilt

Business

The European Central Bank could tilt its purchases of corporate bonds towards companies that pollute less or are cutting their emissions, ECB board member Isabel Schnabel said in a speech on Monday.

Central bankers in the euro zone and around the world are debating what their role should be in the fight against climate change.

Schnabel, an advocate of taking environmental considerations into account when carrying out the ECB’s massive bond-buying stimulus programmes, said excluding polluters altogether would remove an incentive for them to clean up their acts.

“Another possibility would be to pursue a more sophisticated ’tilting strategy’ under which the ECB could adjust its monetary policy operations more gradually in line with sustainability considerations,” Schnabel said.

This would mean buying more green bonds and — because this market is still small — favouring “issuers that have a clear path and commitment to reducing their greenhouse gas emissions”, she added.

Under its quantitative easing programmes the ECB has been buying corporate bonds in proportion to their outstanding amounts, an approach that Schnabel said favours carbon-intensive companies and should be replaced.

Her camp scored a significant victory earlier this month, when Bundesbank President Jens Weidmann dropped his opposition to buying fewer bonds from polluting companies.

ECB policymakers are debating the matter as part of a strategic review which they aim to complete by the autumn.