In a vote on Tuesday 15th February, Members of the European Parliament (MEPs) told the European Central Bank to step up its commitment to fight climate change beyond its action plan adopted in July 2021.
On Tuesday (15 February 2021), the European Parliament adopted its annual resolution on the European Central Bank Annual Report. Although the report is not binding, it is an effective scrutiny tool, which allows MEPs to evaluate the ECB’s past and current activities and make recommendations on the bank’s future policies.
Positive Money Europe has been closely monitoring the reports over the past few years, advocating for strong and comprehensive files that push the ECB to act on topics such as inequality and climate change.
This year’s report of the Parliament (led by Left-wing Greek MEP Dimitrios Papadimoulis) broadly supports a greening of the ECB’s monetary policy with the overwhelming majority of 569 votes (84 against, 38 abstained).
It wasn’t an easy win though. Through a last-minute push, the European People’s Party (EPP) tried to significantly water down the climate change section by asking for a separate vote on several paragraphs including one admitting“that some ECB refinancing and asset purchase programmes have been indirectly supporting carbon-intensive activities” completely ignoring the evidence presented in numerous studies by Reclaim Finance, Greenpeace and Positive Money Europe, to only mention a few.
The EPP group also wanted to delete a paragraph saying that the ECB is bound by the EU’s commitments under the Paris Agreement – a principle that has been reiterated time and again, even in reports led by EPP MEPs, such as the ECB Annual Report 2020, led by German EPP Sven Simon.
In the media, EPP’s leader Markus Ferber explained that he believed greening the ECB was a “distraction”. However he was ultimately defeated as all these paragraphs were adopted and the whole report was approved with the largest majority in the last 10 years.
The content of the report
MEPs highlight the ECB climate action plan’s focus on climate-related risks and the double materiality principle that is at the heart of the EU sustainable finance framework”, signalling its support for further commitment on this. It is also the first time ever that an EP report mentions the principle of double materiality, according to which “it is not just climate-related impacts on the company that can be material but also impacts of a company on the climate” (Matthias Taeger).
Moreover, MEPs warn the ECB–also for the first time in a report– against “relying exclusively on private external credit rating agencies (CRAs) for risk assessment”. By signalling this, MEPs call on the ECB to consider the option of in-house analysis of climate change-related risks, going beyond the ECB’s action plan.
Unfortunately, the paragraph mentioning market neutrality, calling on the ECB “to address market failures and ensure the efficient allocation of resources over a long-term horizon” has been watered down. Nevertheless, the ECB itself has recognised multiple times via the voices of ECB’s president Christine Lagarde and board member Frank Elderson that the concept was neither a legal obligation, and needed reconsideration.
On another note, MEPs have also voted in favour of paragraph 18, which mentions the possibility of examining alternative monetary policy instruments that can encourage public and private investments, urging the ECB to expand its toolbox.
The ECB must play a role in the ecological transition
By overwhelmingly adopting this file, MEPs have reaffirmed that the current energy price crisis should not slow down the ECB’s progress on climate change. As several MEPs, including MEP Gruffat, Ernest Urtasun and Aurore Lalucq, pointed out during the plenary debate with Lagarde on Monday 14th, an effective way to fight inflation in the coming years is to accelerate the shift away from imported fossil fuels and towards domestically produced renewable energy and energy efficiency. As we explain in this op-ed, the ECB can support this transition by targeting its refinancing operations towards bank lending for renewable and energy efficiency investments.
It’s fair to say that this report is the most ambitious one on monetary policy in recent years and shows that there is a solid cross-party consensus on the ECB’s duty to address climate change. It is a reward for the hundreds of NGOs, experts and thousands of citizens who have worked to advance this debate.
Please find the report in the ECON Committee in December here.