Read for 4 minutes Reuters, FRANKFURT, July 8 – On Thursday, the European Central Bank announced plans to incorporate climate change into major monetary policy decisions, the latest in a string of moves by the world’s largest central banks to recognise their involvement in the issue. Climate change would be a role in ECB policies linked to financial information disclosure, risk assessment, collateral, and corporate sector asset acquisitions, according to the results of a long-awaited strategic review. “In the coming months, the ECB will amend the framework governing the allocation of corporate bond purchases to integrate climate change criteria, in line with its mission,” the 19-member euro area’s interest rate-setting authority stated. “These will include, at a minimum, issuer alignment with EU legislation implementing the Paris Agreement through climate change-related indicators or issuer commitments to such targets,” it added in a statement. The ECB is now one of the most forward-thinking monetary bodies when it comes to climate change. The Federal Reserve of the United States has admitted that it has economic implications, but claims that it is not taken into account when making monetary policy decisions. Christine Lagarde, who has spoken passionately about the need for climate action and shared platforms with activists such as David Attenborough, has made establishing the bank’s role in the sector a priority of her first two years at the helm. While the ECB stated that governments and parliaments bear “primary responsibility” for addressing climate change, it acknowledged the need to do more within its mandate due to the potentially significant financial consequences of both extreme weather occurrences and worldwide efforts to reduce carbon emissions. Other ECB decisions announced on Thursday included: the creation of new models and analysis to track the effects of climate change and related policies; and the development of new models and analyses to track the effects of climate change and related policies. – the creation of new measures for green financial instruments and financial institutions’ carbon footprints, as well as their climate risk exposures -related dangers – a clear plan to force climate change starting next year -related disclosures for asset purchases and collateral eligibility – Climate stress tests of the Eurosystem’s balance sheet in 2022, which includes the ECB and the 19-member euro area’s national central banks. The extent to which central banks should be involved in larger climate change policy is a point of contention. While Japan’s central bank is hesitant to buy green bonds, it has declared that it will offer funding to financial institutions that increase loans and investment in climate-change-related activities. The People’s Bank of China stated it enhanced the proportion of green bonds in its foreign exchange reserve investments while keeping investments in high-pollution assets under control. Green bond restrictions make it illegal to support coal-related initiatives. Following a disclosure report last year that revealed the carbon footprint of its asset holdings were consistent with a rise of as much as 3.5-4 degrees by 2100, Bank of England president Andrew Bailey said his bank was looking into methods to green its monetary policy portfolio. The Federal Reserve of the United States is one of the most cautious, with Republican lawmakers breathing down its neck. Despite the fact that the Fed has been performing more study on the economic ramifications of climate change, Fed chair Jerome Powell believes that it is a problem for the government, not monetary policy. (Mark John wrote the piece; Hugh Lawson edited it.)/n
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