Green or sustainable debt doubles in two years, according to the European Central Bank

Frankfurt (Germany), Jan. 24 (EFE). The European Central Bank (ECB) notes that the volume of bonds rated as green or sustainable has doubled in the past two years.

The European Central Bank said on Tuesday that the green and sustainable bond sector “has grown much faster than the public bond market in the eurozone.”

This is one of the main findings of the new statistics that the European Central Bank will publish to help analyze climate risks in the financial sector and monitor the green transition.

These new indicators will also help make progress in the transition to a zero-emission economy.

But the new ECB indicators have limitations because they are empirical and analytical, so they do not meet all the quality requirements of official ECB statistics or are of low quality.

The empirical indicators of sustainable finance provide a picture of debt rated green, social, sustainable or sustainability-related by the issuer being issued or held in the euro area.

However, the ECB cautions that there are no internationally accepted and harmonized standards on what defines a green and sustainable bond, and for this reason the data is less reliable.

“We need a better understanding of how climate change affects the financial sector and vice versa,” said ECB Executive Committee member Isabel Schnabel, which is why developing high-quality data is key.

“The indicators are the first step to help reduce the climate-related data gap, which is crucial for further progress towards a climate-neutral economy,” added the German economist.

At an event in Stockholm, Schnabel recently said that “the European Central Bank should step up its efforts to support the green transition.”

To do this, the ECB will readjust its sovereign debt portfolio towards green bonds, given that governments increase the supply of green bonds.

These portfolio adjustments have made green investments more attractive by lowering the cost of financing them.

In the case of German sovereign bonds, the yield on green bonds has declined compared to the yield on conventional bonds with similar characteristics since September 2020.

In addition, in liquidity operations, the ECB limits the share of assets issued by entities with a high carbon footprint that banks can use as collateral to borrow money.

The ECB will also take into account weather-related risks when setting corporate bond rate cuts.

New data shows that most of the eurozone’s carbon emissions are funded by equity or bond investment funds, even though banks fund the companies that issue the most carbon emissions for invoices.

Weather-related physical risk analyzes analyze the impact of floods, fires or storms on portfolios of loans, bonds and equities.

The European Central Bank says that storm risks affect financial portfolios in the eurozone a lot, but the risk of them causing serious damage is very low.

However, flooding is limited to the affected areas but has a higher level of damage and loss. EFE

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