Chronic. Central banks around the world have responded to the pandemic by stepping up their securities purchase programs put in place since the 2007-2008 financial crisis. These operations have taken a prominent place in monetary policy. For the Eurosystem – i.e. the European Central Bank (ECB) and the national central banks of the euro area – securities held for monetary policy purposes now represent more than half of the consolidated balance sheet (53 % at the end of April 2020) against… nothing twenty years earlier! The approximately 4 trillion euros corresponding to it constitutes a portfolio of securities thicker than that of the largest pension fund in the world, the Japanese fund GPIF.
Can the ECB at least boast, as more and more investment funds are doing today, of applying the fashionable responsible management criteria, the ESG criteria (E for environment, S for social, G for governance)? Still not, and NGOs like Reclaim Finance or Oxfam and Friends of the Earth regularly denounce the problem: as long as the ECB does not take into account the carbon footprint of the issuers of the securities it buys, it will contribute to global warming and hamper the ecological transition. In April, the Central Bank of Belgium was thus sued by the NGO ClientEarth for climate damage.
Sorting assets
It could change. In a recent report, the Network for Greening the Financial System (NGFS), a network of eight central banks and supervisors created in 2017 to work on greening the financial sector, suggests it (“Adapting central bank operations to a hotter world. Reviewing some options », March 2021). This will undoubtedly be the case for the central banks of the Eurosystem following the ECB’s strategic review, the results of which should be known by the summer. It is also well under way on the side of the Bank of England, the first to have communicated, in 2020, its exposure to climate risk. What to give the “la” to the financial markets.
However, it will be recalled that a central bank is not an investment fund, but an institution serving the common good. And it will not be enough for it to sort out the assets it purchases to contribute to the ecological transition. On the one hand, the logic of “social responsibility” and “sustainable development” has not, for the moment, worked miracles to green finance – lack of followers and question of time, will say the optimists. On the other hand, private securities are only a small fraction of the portfolio of central banks, the bulk of which are government securities, and it is rather through this that they should act. But that’s a different kettle of fish, and the NGFS report doesn’t venture there, as the Veblen Institute points out. Should it be that the central bank disqualifies the securities of the States less virtuous on the ecological plan? This is unlikely, and potentially counterproductive for the countries concerned, which would have even more difficulty in initiating their transition once sanctioned by the markets. Or should it coordinate upstream with the States so that the securities of their loans eligible for asset repurchases are used to finance a sufficient section of ecological expenditure? But such agreements would cut into the sacrosanct independence of central banks …
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