ECB’s Lagarde: To Keep Considering Ways of Taking Climate Into Consideration in Monetary Policy

29 September 2023

By David Barwick – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Friday said that the ECB was interested in having monetary policy take climate into yet greater consideration than currently.

In prepared remarks at a joint IEA-ECB-EIB High-Level International Conference, Lagarde said that price stability was the ECB’s best possible contribution to helping the market for green finance, ‘as it gives firms visibility on how their costs will evolve over time.’

‘But for green investments, which often do not provide returns until many years down the line, it is even more important that prices are expected to remain stable’, she said.

Green investments were relatively often financed via retained earnings, and in the absence of price stability, the money used would either lose value or be invested in less inflation-exposed ways at the expense of green technologies, she said.

‘But insofar as price stability is assured, we can also act to protect our balance sheet from climate risk and thereby support the green transition – which we are already doing’, she said.

The ECB’s corporate bond buying already favours firms whose climate record is better, and assets of companies with a large carbon footprint are relatively less acceptable as collateral in ECB operations, she noted.

‘For 2024 and beyond, we will consider ways to continue addressing climate considerations in our monetary policy’, she said.