ECB Urged Not to Waste Time in Making Bond Buying Greener

The ECB weighs green stimulus through bond market purchase in the context of market neutrality considerations. Arguments for green stimulus as a part of the QE program cite the risk that companies themselves will delay climate action if the ECB doesn’t embed green stimulus in QE activities. A report by the New Economic Foundation suggests two approaches for addressing green stimulus in QE. In the first proposal, the ECB would maintain existing purchase rules but simply exclude bonds issued by fossil-fuel companies and companies with high emissions and buy more debt from firms and sectors aligned with the EU Taxonomy. The second proposal would eliminate the ECB eligibility requirements for bonds to be investment grade thereby expanding the population of available environmentally sound and low-carbon related bond deals.