Eurosystem portfolios' vulnerability to ecological degradation disclosed by the ECB

The European Central Bank (ECB) is taking action to address the risks associated with climate change and nature degradation.

In a recent report, Daphné McRae and Morgan Després from the European Climate Foundation highlighted the need for European central banks to impose prudential consequences for poor risk management and mitigation of climate and nature risk. They emphasized that collecting information on these risks is not enough; European central banks need to take action with this information.

One of the actions taken by the ECB is the addition of a new indicator to its climate-related disclosures. This new indicator measures the exposure of the Eurosystem's corporate portfolios to sectors with material dependencies or impacts on nature. The results show that about 30% of the Eurosystem's monetary policy corporate bond holdings are concentrated in utilities, food, and real estate, the three sectors most exposed to nature loss.

The ECB is also making strides in green financing. Its own funds portfolio now contains 28% green bonds, an increase from 20% in 2023, channeling over €6.4bn to the green transition. The ECB aims to increase this share to 32% by 2025.

Moreover, the ECB's governing council has set a target to cut emission intensity by 7%, on average, per year.

The ECB has also acknowledged the risks posed by nature degradation to the economy. A research report identified that certain large banks within the Eurozone have a high risk linked to ecosystem degradation, particularly those linked to land-use pressures that contribute to nature loss. The ECB suggests targeting such banks and associated companies in financial policies to reduce systemic environmental risks.

However, measuring and comparing emissions of different issuers remains difficult due to a lack of data. The ECB's own emissions associated with its monetary policy portfolios and the ECB's foreign reserves continued to decline, but the exact figures are not readily available.

Exposure varies for the ECB's own funds portfolio and staff pension fund, but is highest at 40% for equity exchange-traded funds.

This article was last updated on June 16, 2025. The ECB continues to work towards a more sustainable future, recognising the importance of addressing climate and nature risks in its operations.

Eurosystem portfolios' vulnerability to ecological degradation disclosed by the ECB