so @ecb new climate strategy is out, and it's letting down those of us who expected an ambitious approach.
in my view, far less ambitious than Bank of England's.
1. ECB chose a 'risk framework' that emphasises risks that climate crisis poses to private finance, not the ways in which dirty lending accelerates climate crisis
ECB wastes chance to support Commission in its double materiality efforts.
private finance will be happy
2. ECB conceives transition risks - those risks to private finance from policies to address climate crisis - as entirely fiscal policy related (carbon prices)
but what about transition risks stemming from ECB decisions to decarbonise collateral & corporate bond purchases?
3. Despite calls from @Europarl_EN for @ecb to develop dirty taxonomy because Commission has dropped it under pressure from vested political interests
ECB interested in defining green instruments, but not dirty ones.
subsidise green now, penalise dirty later/never
the language on market neutrality is a walk back on the clear rejection of the principle we've heard from Lagarde and Schnable over the past year, a concession to Bundesbank my guess.
4. The big hitters we expected: ECB plans to decarbonise collateral framework and corporate bond purchases will disappoint @Greenpeace
4.1 Collateral: private ratings still in mix, though ECB adjusts its own internal credit ratings to reflect climate risks (as opposed to climate footprint of assets)
'if warranted' leaves room for doing little on collateral, which matters more than corporate bond purchases
Decarbonisation of collateral framework entirely through a risks framework.
here we see how central bank politics and private finance preferences align:
risks framework essentially justifies ECB doing less to accelerate decarbonisation of private finance
risk framework, we know from debates on Sustainable Finance taxonomy, is what private finance pushed for
the most encouraging is the Corporate Bond purchase program, but remember, this is a crisis intervention, whereas collateral framework is an all weather, and therefore stronger decarbonisation instrument
the language on collateral is also 'subsidise green now, never mind dirty lending'
yes @adam_tooze raises key question: should we applaud converting of notoriously conservative institution or should we pressure it given urgency of climate crisis?
for a second, I let myself believe that ECB would be able to do what Commission failed
let's compare it Bank of England, who shares the 'orderly transition' take but with a better framework
first, never have quotation marks done a more important signalling job
second, not 'climate risks to portfolios' but climate footprint of corporate bonds @bankofengland has purchased
this is how you identify dirty lending via capital markets
(tricky in practice how one combines backward&forward looking indicators)
third, the Principles for decarbonising: first carrots for companies to transition to low carbon and then sticks.
one can debate the net zero framing, the credibility of transition plans, and the sequencing, but it's a clear commitment and framework to punish dirty lenders
magic word central bank geeks will say a lot over next few years is 'tilting' - the combination of green and dirty assets BoE/ECB choose in its portfolios, either unconvetional or via collateral channel.
Bank of England already has a plan for tilting
well @Lagarde is selling the ECB turn to climate better than the documents do: 'it's not just words, but a pretty strong step'
it's definitely a step.
@Lagarde maybe someone should ask 'what in an ideal world would this Strategic Review have included, but you couldnt because you know, ze Germans'
hmm @Lagarde in 5 years time, decarbonisation: 1. Disclosure to be eligible on collateral & corporate bond (very unambitious) 2. 'proper allocation of resources per Treaty - risks better taken into account via tilting and haircuts
single materiality is now name of the game
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Two amazing Global South progressives and a Nobel prize winner walk into an Oxfam panel on post-neoliberalism
Stiglitz: w neoliberalism, the growth of financial markets changed the political game tremendously
Lula 's special advisor @AAbdenur - clear mismatch - Global North openly exposing industrial policy but pushing IMF/World Bank to continue with austerity and partnerships for hyper-financialisation
missing from this @FT account of the rapid rise of infrastructure as an asset class is the sustained effort that G20 governments have put into derisking infrastructure assets for institutional capital - this is the derisking state in action #WallStreetConsensus
@FT with @BJMbraun we've termed this a weak derisking macrofinancial regime - a set of policies (as in the G20 Infrastructure as an Asset Class agenda, or World Bank Maximising Finance for Development) that seeks to mobilise private capital into infrastructure osf.io/preprints/soca…
BlackRock 's recent acquisition of GIP is a bet that governments - under ideological or real constraints on fiscal space - will not pursue public infrastrucuture projects but instead continue to derisk private capital
I did not expect this, but Rachel Reeves' Mais lecture is a lot more interesting - and dare I say, promising - than either the commentariat focused on fiscal rules or the past weeks of 'maxxed credit cards' would have us believe
some parts are taking a direct swipe at us advocates of Big (Green) State, but it's a careful articulation of the alternative rather than the empty austerity ideology of 'maxxed out credit cards'
1. We're getting climate politics back at the Bank of England.
Remember, under Carney, it became a world leader in climate policy making, not the greenwashed US Fed version of 'disclosure'/single materiality that Bailey prefers.
it is a strategic and tactical mistake for progressives to centre the superrich in climate politics.
Tactics - global tax system is organised to enable rampant tax avoidance + evasion for both high net worth individuals & corporations.
Recent efforts to reform have been far less successful than we'd have expected a decade after Piketty made inequality politically salient at global level. Fighting for global solutions around taxes is important, but shouldnt be the key front.
Global South voices - here the President of Colombia - read in the European/US support of the genocide in Gaza a blueprint, an experiment for ecofascism that 'treats us as disposable lives'.
'we are heading to barbary. Humanity, especially in the South, depends on the road we choose to address the climate crisis produced by the Global North. Gaza is the first experiment to treat us as disposable lives.'
Clearer European minds anticipated this response to von der Leyen - but the damage is done
the @ecb hiked rates to highest level ever today, but this matter less.
@Lagarde promised European Parliament to return ECB to Paris climate commitments but still nothing!
in a new report we show it can do Green Unwinding @AuroreLalucq @henrikehahn greenpeace.de/publikationen/…
we are in the middle of a climate emergency, and the @ecb has stepped back from cleaning its portfolio of dirty bonds -
for no other reason except the (imagined) danger that @lagarde may be seen as 'Mme Climate' instead of fighting inflation.
but fighting inflation & pursuing its 'within mandate' climate rules are not at odds with each other - the opposite.
Mme @lagarde should remind her PR team that subsidising fossil capital, as ECB continues to do via its portfolio of corporate bonds, amplifies supply pressures