A Green ECB Collateral Policy (cepInput)
The role of central banks is a recurring theme in the debate on sustainable finance. The European Central Bank (ECB) also wants to address sustainability in its strategic review. This cepInput makes a proposal on how the ECB can take sustainability into account in its collateral policy.
While a preferential treatment of "green" investments in the ECB's collateral policy could promote the transfer of financial resources into sustainable economic activities, this would not be compatible with the current risk-based approach of ECB collateral policy and would not be market neutral. The cep proposes instead that the ECB requires banks to maintain a minimum proportion of sustainable assets in their collateral pool.