Eurosystem's portfolio vulnerability to environmental degradation disclosed by ECB

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

According to a recent report, 72% of companies in the euro area are at risk of ecosystem degradation. In response, the ECB has identified nature degradation as a risk to the economy and is taking action.

One of the measures the ECB has taken is increasing the share of green bonds in its own funds portfolio. The ECB's own funds portfolio now contains 28% green bonds, an increase from 20% in 2023. The ECB aims to increase this share to 32% by 2025.

The ECB has also added a new indicator to its climate-related disclosures to measure the exposure of the Eurosystem's corporate portfolios to sectors with material dependencies or impacts on nature. This new indicator shows that the ECB is taking steps towards improving its understanding of the risks and impacts of nature loss.

However, measuring and comparing emissions of different issuers remains difficult due to a lack of data, according to the ECB. Daphné McRae and Morgan Després from the European Climate Foundation have stated that European central banks need to impose prudential consequences for poor risk management and mitigation of climate and nature risks.

The ECB's governing council has set a target to cut emission intensity by 7%, on average, per year. The ECB's carbon emissions associated with its monetary policy portfolios and foreign reserves continue to decline.

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

The ECB has channelled over €6.4bn to the green transition through green bonds in its own funds portfolio. However, the search results do not provide specific information on which Eurosystem institutions hold the largest amounts of monetary policy corporate bonds in the three sectors most affected by nature loss.

Daphné McRae and Morgan Després also emphasized the need for reliable, harmonised reporting standards across sectors and jurisdictions to support informed investment decisions and effective risk management. More work is needed on understanding how climate and nature risks should feed into regulatory capital requirements, according to the duo.

The ECB has only just begun to address climate and nature risks in individual firms, according to Daphné McRae and Morgan Després. The bank needs to continue its efforts to ensure a sustainable and resilient economy for the future.

This article was last updated on June 16, 2025.