ECB’s Villeroy: Financing Green Investment Directly Would Risk Price Stability

3 May 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Friday said that the direct financing of green investments by the ECB could have a negative impact on price stability.

In an interview with French television channel Public Sénat, Villeroy, who heads the Banque de France, said, ‘If the ECB directly financed green investments, we would risk rising inflation and elevating financing costs, so we would probably make the climate transition more complicated.’

‘The ECB can’t do everything, but I guarantee that it will do its utmost to support the [green] transition’, he added.

It was important to work on how to make the ECB’s operations and monetary policy greener, he said, noting that the ECB was already considered a pioneer among advanced economies on greening monetary policy, which was evident, for instance, ‘[i]n the bonds that we buy, in the securities that we take as collateral, in the monitoring of risks carried by the banks.’

Climate implications were taken into consideration by the ECB and the Banque de France in their respective economic projections, he said.

‘[W]e must also work on what I call climate economics or climate macroeconomics, try to quantify the effects of climate change on inflation, on growth, on investment’, he said.

Private savings were a key component in the green transition, he said, which was why the Capital Markets Union was important.

‘The good news, and this is what made me express a certain confidence in the fact that this transition is financeable, is that in Europe we have private savings’, he said. ‘There is a surplus of private savings which can finance a good part of these investment needs.’