New Climate Plan May Have Greener Monetary Policy, Says ECB

The European Central Bank- ECB on January 30 has hinted that it could make its monetary policy much greener as part of a new thrust so as to take climate change into account in its work.

It is well to be noted that some activists have been calling for years when it comes to the ECB to attach climate targets, open up a new tab to its long-term loans to banks, and also stop buying the bonds of polluting firms.

Such tools that add stimulus have been stopped in the past two years as the ECB has gone on to turn its focus to fighting inflation; however, in a release setting out its 2024-25 climate as well as nature plan on January 30, the bank suggested this might as well change in the future.

The ECB remarked that it will explore, within its purview, the case for more changes to its monetary policy instruments as well as portfolios in view of this transition.

The ECB, which happens to be the central bank for the 20 countries that go on to share the euro, had previously applied a green tilt when it came to reinvesting proceeds from one of its major portfolios of bonds, but this came to a halt as part of the inflation fight.

Introducing the climate plan, Frank Elderson, the ECB board member, said this tilting framework, which happens to be criticized as too weak by a few analysts, had attained its goals and will at the same time remain in place.

Elderson, however, added that giving subsidized credit to banks in return for green lending went on to present numerous issues, like identifying the right borrowers. It is well to be noted that the European Union, in 2023, set out new benchmarks for companies that issue green bonds.

Additional radical changes may as well go on to prove divisive. Although such initiatives have been aced by Elderson and Isabel Schnabel, a fellow board member, other policymakers like Pierre Wunsch from Belgium happen to be skeptical, thereby arguing that it is for governments to fight climate change.

Notably, the U.S. Federal Reserve is also coming under pressure so as to consider climate change in its own policy, analysis, as well as research.

Other aspects when it comes to ECB’s 2024-25 climate plan go on to include further analysis of the green shift and the impact of extreme weather events on inflation as well as the financial system.