As the European Central Bank (ECB) gears up for its strategic retreat in Ireland, we, along with our partners NEF, Reclaim Finance, Finanzwende, Greenpeace, the Veblen Institute, Urgewald, Finance Watch, REVO Prosperidad Sostenible and The Sunrise Project are calling on the institution to bolster its climate commitments. Today, on 21 May, we issued a joint statement, Monetary policy for a stable and prosperous EU: how the ECB should address the climate and nature crisis, urging the ECB to more effectively use monetary policy to combat climate and nature crises.
The ECB has made strides in recognising its role in climate change mitigation, but there is a clear need for more decisive actions. Recent interest rate hikes, which have adversely affected investments in clean energy and energy efficiency, underscore the disconnect between Europe’s climate commitments and the ECB’s current policies.
Four years after the last one in 2021, the upcoming strategy review planned for 2025 presents a pivotal opportunity for the ECB to implement monetary policies that adequately respond to the significant environmental challenges we face.
The ECB cannot afford to overlook climate and nature crises. Our statement outlines key principles that we believe the ECB should adhere to, including adopting precautionary measures to minimise environmentally harmful activities, recognising climate considerations within the primary mandate of price stability, and fostering better coordination between governments and central banks to tackle inflation and environmental challenges.
In addition to climate considerations, we stress the importance of social equity, urging the ECB to transparently quantify and review the distributional effects of its monetary policy decisions.
Our policy recommendations encompass adopting a transformative approach to the ECB’s collateral framework that incorporates climate and nature considerations. We also propose the introduction of more favourable interest rates on long-term targeted refinancing operations to lower financial barriers to sustainable investments, which are crucial for long-term price stability and the EU’s transition objectives.
The upcoming strategy discussions offer a unique opportunity for the ECB to demonstrate its global leadership by placing sustainability at the core of European monetary policy. This also provides an ideal platform for continued engagement with civil society, shaping an effective monetary policy that addresses the risks of climate and nature crises and capitalises on the opportunities of the green transition.