The European Central Bank (ECB) presented an action plan to further incorporate climate change considerations into its policy framework. The abovementioned action plan highlights that climate change may affect price stability due to its impact on several macroeconomic indicators such as inflation, interest rates, investment and productivity. To cope with the abovementioned issues, the European Central Bank will take the following actions:
– Identifying and introducing technical assumptions on carbon pricing for the period 2021-2022;
– Developing new macroeconomic models and carrying out an analysis to identify the possible implications of climate change related to the economy, the financial system and the transmission of monetary policy through financial markets and the banking system to households and firms for the period 2022-2024;
– Developing new indicators which will take into account green financial instruments and the carbon footprint of financial institutions, along with climate-related physical risks for the period 2021-2022;
– Introducing disclosure requirements for private sector assets as a new eligibility criterion for a differentiated treatment for collateral and asset purchases; – Taking climate change risks into account when reviewing valuation and risk control frameworks for assets mobilised as collateral by counterparties for Eurosystem credit operations, as well as tracking structural market developments in sustainability products.