Rules should also apply to purchases of corporate bonds by the central bank
France’s central bank chief Francois Villeroy de Galhau has rushed ahead in the climate debate with a proposal for the monetary policy of the European Central Bank (ECB). The central bank should introduce climate criteria for corporate bonds, said de Galhau on Thursday during a climate conference in Paris. The rules should apply to both the ECB's purchases of corporate bonds and the acceptance of such paper as collateral in the central bank's refinancing business.
Specifically, the French suggested avoiding securities from companies with a bad carbon footprint in the ECB's purchase program and giving preference to companies with good climate policies. In the refinancing business, the valuations of the securities should be adjusted accordingly.
Government bonds, which the ECB buys on a large scale, should not be affected by the climate criteria. A distinction between the respective climate policies of the countries is difficult, argues the central bank chief.
Villeroy de Galhau justified his move with the fact that climate changes could affect the ECB's goal of stable prices. Climate shocks, for example, could drive prices up or reduce economic growth. ECB President Christine Lagarde recently made a similar statement, who also wants to integrate climate policy more closely into the monetary policy of the central bank.
