Lagarde’s Green Push Picks Up With New ECB Collateral Option

(Bloomberg) -- The European Central Bank will start accepting bonds linked to environmental goals as part of President Christine Lagarde’s drive to press ahead with a green agenda.

In a move that broadens the universe of green assets it accepts as collateral, bonds with coupons linked to sustainability performance targets will be eligible for its refinancing operations from January, the ECB said. They could also be used in the central bank’s quantitative easing programs if they comply with other criteria.

Sustainable investing is a fast-growing area of finance and Lagarde has repeatedly argued that the ECB must play a role in fighting climate change.

“I would not put it past the ECB to do some form of green QE at some point,” said Claus Vistesen, chief euro-area economist at Pantheon Macroeconomics. “This is just snowballing downhill now, it’s not going to stop.”

Lagarde has told the European Parliament that climate change should be “mission critical” for the Frankfurt-based institution, and she has made it part of a strategic review that is due to be completed next year.

The ECB already accepts green bonds as collateral. An ECB spokeswoman described Tuesday’s announcement as a technical change that the central bank hopes would encourage issuance.

Bloomberg New Energy Finance wrote earlier this month that the sustainability-linked bond market had been slow to take off, though voluntary guidelines defining the instruments and promoting transparency should help expand it.

There are also concerns over potentially misleading claims about environmental responsibility.

Companies that issue green debt aren’t necessarily reducing their carbon emissions, underscoring the need for firms to have an environmental rating, the Bank for International Settlements said in a report this month. Concern about standards were raised when Spanish oil company Repsol SA in 2017 became the first major oil refiner to sell the securities.

Green bonds are issued to finance specific projects without affecting a firm’s environmental credentials as a whole. Sustainability-linked bonds, meanwhile, are tied to more general environmental targets.

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