Lautenschlaeger Says the ECB Should Help Fight Climate Change

(Bloomberg) -- Sabine Lautenschlaeger called for the European Central Bank to become more active in fighting climate change as she prepares to depart the institution following her shock resignation from the Executive Board.

Speaking in Dusseldorf on Wednesday, the German policy maker said the ECB can seek to identify and mitigate climate-related risks in the financial system as well as work with other central banks to examine their potential effect on monetary policy. Yet she cautioned against using the quantitative easing program as a tool for the environmental cause -- echoing Bundesbank President Jens Weidmann.

“We have also bought green bonds under our asset purchase program,” Lautenschlaeger, who leaves the ECB on Thursday, told the audience. “But we have to make sure that we are not creating market distortions -- we have to remain market-neutral. This means that the ECB can only buy a limited amount of the green bonds available on the market.”

Weidmann warned earlier this week that giving preference to green bonds when conducting QE policies risks overburdening central banks and could eventually endanger their independence. The ECB’s incoming president, Christine Lagarde, has argued that discussions on whether and how central banks can contribute to mitigating climate change should be a “priority.”

Lautenschlaeger’s unexpected September decision to cut short her term at the ECB came amid a public spat among policy makers over stimulus package that included renewed bond buying and a rate cut. While she opposed the new round of QE, the German policy maker didn’t give reasons for her early departure.

On Wednesday, she indirectly address the uneasy relationship between the ECB and Germany, where loose monetary policy has been blamed for hurting savers and contributing to a rise of far-right parties.

She said the Frankfurt-based institution needs to “address all citizens, not just an expert audience -- without ever becoming political, of course -- but only in order to bring facts and explanations to economic issues.”

--With assistance from Yuko Takeo.

To contact the reporter on this story: Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Zoe Schneeweiss, Fergal O'Brien

©2019 Bloomberg L.P.