Energy Efficiency, GHG Emissions  -  January 24, 2023

ECB Provides Climate Stat Indicators

The European Central Bank (ECB) published its first set of climate-related statistical indicators to better assess the impact of climate-related risks on the financial sector and to monitor the development of sustainable and green finance..

“We need a better understanding of how climate change will affect the financial sector, and vice versa. For this, the development of high-quality data is key,” says Executive Board member Isabel Schnabel in a statement. “The indicators are a first step to help narrow the climate data gap, which is crucial to make further progress towards a climate-neutral economy.”

The indicators cover three areas, including experimental indicators on sustainable finance that provide an overview of debt instruments labeled as “green”, “social”, “sustainability” or “sustainability-linked” by the issuer that are issued or held in the euro area. The data show that the volume of sustainable and green bonds has more than doubled over the last two years and grew much faster than the overall euro area bond market. Besides boosting transparency, these indicators also help track progress on the transition to a net-zero economy. The lack of internationally accepted and harmonized standards on what defines a green or sustainable bond makes the data less reliable overall.

The second indicator includes analytical indicators on carbon emissions financed by financial institutions that provide information on the carbon intensity of the securities and loan portfolios of financial institution. Preliminary results show that in the euro area most of the emissions financed via equity or bonds are held by investment funds.The most carbon-intensive activities are financed via the banking sector as the companies they finance produce relatively more emissions in their business operations.

Analytical indicators on climate-related physical risks analyze the impact of natural hazards, such as floods, wildfires or storms, on the performance of loans, bonds and equities portfolios. 

In July 2022 the ECB published a detailed climate action plan on how to incorporate climate change considerations into its monetary policy framework. In October 2022 it started tilting its corporate bond holdings towards issuers with a better climate performance.