ECB To Accept Sustainability-Linked Bonds As Collateral

The European Central Bank (ECB) on Tuesday decided that bonds with coupon structures linked to certain sustainability performance targets will become eligible as collateral for Eurosystem credit operations.

"It will be also eligible as collateral for Eurosystem outright purchases for monetary policy purposes, provided they comply with all other eligibility criteria," according to a ECB statement.

The decision aligns the treatment of marketable and non-marketable collateral assets with such coupon structures.

"The coupons must be linked to a performance target referring to one or more of the environmental objectives set out in the EU Taxonomy Regulation and/or to one or more of the UN's sustainable development goals relating to climate change or environmental degradation," it stressed.

The ECB noted the decision applies from Jan. 1, 2021.

Noting the coronavirus pandemic has also clearly refocused people's attention on the environment, the bank's head Christine Lagarde said: "We cannot miss this opportunity to reduce and prevent climate risks and finance the necessary green transition."

The EU will need up to €470 billion ($553 billion) of additional investment every year to reach its current climate and environmental policy goals, she underlined. -