European Central Bank to introduce 'climate factor' when lending to banks, raising pressure to channel financing towards 'greener' sectors
European Central Bank to introduce 'climate factor' when lending to banks, raising pressure to channel financing towards 'greener' sectors
www.ecb.europa.eu
ECB to adapt collateral framework to address climate-related transition risks
- The European Central Bank (ECB) is set to introduce what it calls a 'climate factor' when lending to banks against appropriate collateral in their short and long-term financing instruments.
- This climate factor could reduce the value assigned to the assets pledged as collateral, thus protecting the Eurosystem against a potential decline in collateral value in the event of climate-related shocks.
- The climate factor also raises the pressure on commercial banks to direct their funds towards 'greener' investments as the bloc seeks to reduce it carbon footprint.
- The new measure will apply to marketable assets issued by non-financial corporations, taking effect in the second half of 2026.