Sustainable Finance & Central Banks

Addressing the threat of climate change requires a major shift in how financial resources are allocated. Positive Money campaigns to align the European Central Bank’s monetary policy with the EU’s sustainability goals.

Climate change is probably the biggest challenge our society is facing right now. Massive investment is needed: the European Commission estimates 180 billion euros per year is needed for the next two decades in order to finance renewable energy, green transportation systems, and make our buildings energy efficient.

Unfortunately, the current financial system is not helping. Right now, investors still have many incentives to put their money into fossil fuel industries and speculative activities, instead of towards the investment we need to transition the economy. Economists describe this phenomenon as the tragedy of the horizon: the financial sector tends to focus on short term profits, while society as a whole needs finance to look at long-term sustainability.

Climate change itself is a threat to the stability of the financial system. The value of many financial assets rests on the future use and extraction of fossil fuels. The financial system could collapse when society moves away from the carbon economy, destroying entire sectors of the current economy – wiping out billions of underlying investments.

In 2015, the European Union ratified the Paris climate agreement, which clearly acknowledges that the green transition cannot happen unless financial flows are aligned with the climate change goals. We can’t do that unless the ECB is involved.

No green finance without green central banks

Among the EU institutions, an important conversation on “sustainable finance” has already started. In 2017, the European Commission launched a high-level group of experts who formulated a list of recommendations to the EU.

Recommendations include changing incentives within the financial sector itself, for example by forcing all companies and investors to disclose the carbon-impact of their investments.

While this strategy is needed, there is a danger that this will move finance too slowly.

Positive Money thinks the planet cannot afford to wait for the private sector to catch up with the necessity of tackling climate change. The public sector needs to step up to pioneer the investment needed in greening the economy. Central banks are no exception to that.

Positive Money’s goal is to make sure that the ECB and national central banks in the Eurozone adjust their policies to the EU’s environmental commitments.

Central banks have powerful tools such as collateral eligibility requirements and quantitative easing in order to steer the financial markets towards better capital allocation. Unfortunately those instruments are currently exacerbating climate change. For example, the ECB has invested more than 130 billions euros into corporate bonds that contribute massively to greenhouse gas emissions. This kind of policies should either stop or incorporate sustainability criteria.

Instead of just purchasing what the current market offers and perpetuating the status quo, the European Central Bank could directly provide funding for pan-european investments into green infrastructure.

How to green the European Central Bank

In February 2018, the European Parliament adopted a report which recalls that the ECB is bound by the Paris agreement, and therefore should start taking action on the matter. Positive Money’s goal is to push the Parliament’s report further by making the ECB comply with the Paris agreement ratification.

Our campaigns and advocacy work currently cover the following proposals to make central banks green:


Latest news on sustainable finance


As part of quantitative easing, the ECB has injected more than 130 billions euros into corporate bonds. As a study by the Grantham Institute (LSE) showed, the bulk of this money is invested by the ECB into multinational companies who contribute most to climate change.

The first step for central banks to green their activities consist in taking stock of the current impact of their policies, such as the Corporate Sector Purchase Programme.

Together with partners from civil society, we are currently asking the ECB and various national central banks to make their own assessment of the carbon impact of their market operations.


Positive Money argues that the ECB should at the very least exclude companies involved in fossil fuel activities of the list of eligible companies to the quantitative easing programme. Since 2017, we have been coordinating a coalition of more than 70 NGOs who agree that the ECB should stop dirtying its hands this way.

This would pave the way for an overall update of the ECB’s collateral eligibility framework to make sure that all standard market activities of the ECB incorporate sustainability criteria.


On top of monetary policy, the ECB and national central banks have been tasked to supervise the stability of the financial system. They do this through microprudential and macroprudential policies, and other regulatory measures.

Because climate change is a threat to financial stability, we advocate for central banks to implement green macroprudential policies. In practice, those measures would discourage investors from investing into fossil fuel assets, by imposing a higher capital requirement on those assets. This essentially forces banks and investors to keep higher capital buffers and ensure the financial system is less leveraged and therefore less prone to provoke a financial crisis.


It does not make sense to sacrifice public investment through austerity policies when at the same time the European Central Bank is injecting more than 2.5 trillion euros into financial markets through quantitative easing.

Quantitative easing is so far a wasted opportunity to boost investments into the green transition. Positive Money has been campaigning since 2015 for a “green quantitative easing”. With this alternative approach the ECB could allocate a significant part of the QE programme specifically towards investment into the green transition.

We are part of a large coalition of NGOs and prominent academics and politicians who think the ECB should allocate 1 trillion euros to finance the energy transition.


Further resources

Targeting a sustainable recovery with Green TLTROs (2020)

The EU today faces two dramatic challenges: the COVID-19 Pandemic and the climate transition. The EU’s recovery plan for the pandemic falls far short of the estimated €2 trillion needed for achieving a sustainable recovery in line with the EU’s environmental objectives.

This report from Positive Money Europe and the Sustainable Finance Lab explains how the European Central Bank can incentivize private banks to lend more money for green investments. By tweaking its Targeted Longer-Term Refinancing Operations (TLTROs) programme, the ECB could make green lending much more affordable for small businesses and households.

The ECB and climate change: outlining a vision for success (2020)

The EU economy urgently requires innovative and bold reforms that reshape finance, so that it can help sustain our planet and enable us to thrive.

In this policy briefing, co-written with the New Economics Foundation and, we offer policymakers a list of recommendations that, if implemented by the ECB, would constitute a successful strategic review from a climate justice perspective.

Aligning monetary policy with the European Union's climate targets (2019)

This analysis of the European Central Bank’s corporate bonds portfolio reveals a worrying gap between the ECB’s quantitative easing programme and the European Union’s climate objectives.

This report, co-written by Stanislas Jourdan (Positive Money Europe) and Wojtek Kalinowski (Veblen Institute), includes an exclusive analysis of the corporate-sector purchase programme (CSPP) by the European Central Bank (ECB). The report was originally published in French (here).

Central Banks, Climate Change and the Transition to a Low-Carbon Economy (New Economics Foundation - 2017)

While central banks have played an increasingly interventionist role in our economies since the financial crisis, this has not coincided with any significant adjustment of their policies to support a low-carbon transition.

This briefing explain how central banks should play a more prominent role in supporting a low-carbon transition rather than maintain the status quo; the authors also identify some policy interventions that could help central banks address the growing challenges of climate change. In particular, they recommend a green macroprudential policy approach, green credit allocation interventions, and greening central bank balance sheets (also known as ‘Green QE’).

The Climate impact of Quantitative Easing (LSE - Grantham Institute - 2017)

Both climate change and the low-carbon transition are likely to have deep implications for the functioning and stability of the macro financial system. The discussion of possible risks has largely focused on the private sector; however, this paper argues that central banks should also consider how their operation of monetary policy could affect the transition to a low-carbon economy. Even supposedly market-neutral interventions by central banks may show an unintended structural bias towards carbon-intensive industry incumbents.

The role of central banks in enhancing Green finance (UNEP - 2017)

The paper examines the role of central banks in ‘greening’ financial systems. Given the enormous investment needed to bring about a green transformation, the financial sector will have to play a central role in allocating resources towards a sustainable and green economy – and stop financing activities that harm the environment. Against this backdrop, the paper examines the extent to which environmental factors impinge on central banks’ conventional goals and provides a theoretical analysis of the cases for and against central banks to respond to environmental and sustainability challenges. Moreover, the paper explores the ways in which central banks (as well as financial regulatory authorities) can impact investment decisions and the creation and allocation of credit through monetary as well as micro- and macroprudential policies.

What Role for Financial Supervisors in Addressing Systemic Environmental Risks? (DSF - 2015)

Since the global financial crisis, financial supervisors have developed a new macroprudential policy framework to identify systemic financial imbalances and address these. At the same time, a literature is rapidly developing on financial shocks that may originate from ecological imbalances and climate related risk (physical, transition and liability risks).
However, financial supervisors have so far given little attention to this ecological dimension. This allows systemic financial imbalances resulting from ecological pressures to build up and concentrate in financial institutions and markets. This paper sketches the ecological dimension of the macroprudential policy framework and illustrates the working for the case of carbon emissions.

The Power of the Eurosystem to promote environmental protection

The misalignment of the Corporate Sector Purchase Programme (CSPP) with the EU’s environmental commitments has stirred a lot of political debate in recent months. This essay puts forward the argument that the Eurosystem is bound by article 11 TFEU to integrate environmental objectives into the mandate of the Eurosystem. On this basis, the essay provides a critical analysis of the validity of the controversial CSPP. 

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