Climate emergency: Lagarde says ECB must step up action

Bank president indicates she will move bank beyond traditional remit of controlling inflation

Christine Lagarde has said the European Central Bank should do more to help tackle the climate emergency, as she came under pressure from MEPs to step up action against global heating.

In a strong hint that as president she would move the ECB beyond its traditional remit of controlling inflation, Lagarde said the bank would incorporate the climate threat into both its economic forecasts and in its capacity as watchdog of the financial system.

The ECB, like all central banks, uses models to forecast how the eurozone economy will work. “These models need to incorporate the risk of climate change,” said Lagarde. “That’s the very least, I think, we should expect.”

The former managing director of the International Monetary Fund came under pressure at the EU committee on economic and monetary affairs over the ECB’s failure to support the greening of the eurozone economy through the purchase of bonds in environmentally friendly companies.

She said the ECB’s bond portfolio – bought under its quantitative easing programme – contained “multiple shades from green to brown” because the bank operated a policy of market neutrality that ruled out stimulating a particular sector.

Lagarde said the review of the ECB she had implemented after succeeding Mario Draghi as president last month would look at whether the policy should be changed.

It was also important that the rating agencies took climate change into account when assessing credit-worthiness.

“I would hope that the three big, well-known rating agencies (Moody’s, S&P and Fitch) move in that direction,” Lagarde said. “If they ask me my views, I will tell them.”

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Larry Elliott Economics editor

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