ECB bond purchases in favor of green companies from next month

The European Central Bank will target its corporate bond purchases towards companies that emit less carbon, giving each company a score based on their past performance, future targets and climate claims.

To play a role in the fight against climate change, the ECB unveiled a range of measures over the past year, from banking supervision to monetary policy, and favoring companies with better carbon footprints is among its most recent actions.

“One goal is to reduce the exposure of the Eurosystem to climate-related financial risks,” the ECB said in a statement. “Furthermore, these measures support the green transition of the economy in line with the EU’s climate neutrality goals.”

The ECB will use a climate score developed by the bank for all corporate bond purchases from October, which initially includes the reinvestment of maturing cash from existing bonds.

However, the bank will not sell bonds even if the issuer receives a low climate score, nor will it disclose the climate score assigned to each company.

The ECB will look at each company’s issuance history and how they compare to other companies. It will also take into account the targets set by emitters to reduce their greenhouse gas emissions and also look at the quality of climate-related disclosures.

“The (ECB) will use the climate score to adjust its bids in the primary market to favor issuers with better climate performance and to set maturity limits for bonds from lower-scoring issuers,” the ECB added. ECB bond purchases in favor of green companies from next month

Fry Electronics Team

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