The European Central Bank (ECB) will introduce a new “climate factor” into its collateral framework, aimed at addressing financial risks stemming from climate-related uncertainties and enhancing the resilience of its monetary policy operations.
Announced by the ECB’s Governing Council, the measure will take effect in the second half of 2026 and apply to marketable assets issued by non-financial corporations and their affiliated entities. The climate factor will adjust the valuation of eligible collateral used in the Eurosystem’s refinancing operations based on the asset’s sensitivity to climate-related transition risks.
The ECB stated that collateral pledged by counterparties in refinancing operations is vulnerable to potential devaluation during climate transition shocks. The new climate factor is intended to act as a buffer against such risks and will complement existing risk management tools by incorporating forward-looking climate scenario analysis.
“The calibration of the measure will preserve adequate collateral availability,” the ECB noted, indicating that it seeks to balance financial prudence with market functionality.
The climate factor will be applied to individual assets and will take into account several criteria: sector-level data from the ECB’s 2024 climate stress test, the issuer’s climate score under the Corporate Sector Purchase Programme (CSPP), and the residual maturity of the asset.
The ECB added that the measure will be regularly reviewed in light of evolving data availability, regulatory changes, and advancements in climate risk assessment methodologies.
