29 July 2025
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New climate-related measure aims to protect the Eurosystem from potential losses due to green transition risks
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Step enhances the resilience of monetary policy by addressing future climate uncertainties
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Applies to marketable assets issued by non-financial companies from mid-2026 onward
The European Central Bank (ECB) Governing Council has approved a new measure to strengthen the Eurosystem’s ability to manage financial risks linked to climate change. This update to the collateral framework focuses on better protecting the central bank from losses if assets pledged by banks lose value due to adverse climate-related developments.
To address these risks, the ECB will introduce a “climate factor” that could reduce the value of certain assets used as collateral in refinancing operations. This climate factor will depend on how vulnerable a given asset is to transition risks—such as policy or market changes related to the shift to a greener economy. The aim is to introduce a forward-looking risk buffer, making monetary policy operations more robust in the face of climate-related uncertainties.
Initially, the climate factor will apply to marketable assets issued by non-financial corporations and their affiliates. It will consider several indicators, including:
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Sector-specific climate stress test data from the 2024 ECB climate stress test
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The issuer’s climate performance score under the Corporate Sector Purchase Programme (CSPP)
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The remaining maturity of the asset
The measure is set to come into effect in the second half of 2026. It will be regularly reviewed to reflect evolving data quality, modelling capabilities, and regulatory developments.
