ECB Boosts Climate Risk Rules for Collateral

The European Central Bank (ECB) has expanded its climate risk rules for collateral used in Eurosystem refinancing operations. The ECB will now apply climate-related valuation adjustments to certain corporate credit claims, with assets having greater exposure to transition uncertainty facing an additional collateral reduction of up to 5%.

Implementation is expected no earlier than the end of 2027, with climate factor values updated annually. This move extends a climate factor already applied to marketable assets issued by non-financial corporations and affiliated entities.

The policy aims to protect the Eurosystem against potential losses if transition shocks reduce the value of pledged collateral. The ECB considers climate risk as a financial risk that can affect collateral quality, central bank balance sheets, and the stability of euro area funding markets.