• The increasing impact of the climate crisis on the economy and the financial system calls for increased action.
• The ECB reaffirms that it is continuing its existing climate action, which it will review regularly.
• In 2024 and 2025, its work will focus on three areas: the consequences of the green transition, the physical impact of climate change and nature-related risks in relation to the economy and the financial system.

The European Central Bank (ECB) has decided to expand its climate-related activities and focus them in 2024 and 2025 on the following three areas:

• the impact and risks of the transition to a green economy, in particular the related costs of the transition and investment needs;
• the increasing physical impact of climate change and how adaptation measures to a warmer world affect the economy;
• the risks arising from nature loss and degradation, their interaction with climate-related risks and the potential impact on the ECB’s work due to their impact on the economy and the financial system.

“Warmer climate and degradation of natural capital are changing our economy and financial system. We need to understand and deal with this change to continue fulfilling our mission," said ECB President Christine Lagarde, adding: “We are expanding and strengthening our activities to better understand the implications of these changes and thereby contribute to the stability and green transition of the economy and the financial system.”

Therefore, the following practical measures were agreed:

• In relation to the green transition, the ECB will step up its activities related to the effects of transition finance, green investment needs, transition plans and the impact of the green transition on certain aspects of our economy, such as labour, productivity and growth. The results of these activities will feed into the design of this macro-modelling framework by the ECB. Furthermore, the ECB will consider, within its mandate, the reasons for further changes to monetary policy instruments and portfolios taking into account the green transition.
• In connection with the increasing physical impact of climate change, the ECB will deepen its analysis of the impact of extreme weather events on inflation and the financial system and how this impact can be incorporated into climate scenarios and macroeconomic projections. It will also assess the potential impact of adaptation to climate change or the absence of such adaptation on the economy and the financial sector, including related investment needs and insufficient insurance coverage.
• In relation to nature loss and degradation, the ECB will analyse the close link with climate change and the related economic and financial consequences. It will also continue to explore the importance of ecosystems for the economy and the financial system.
• In connection with its operations, the ECB will launch its eighth environmental management programme with a view to achieving its 2030 carbon emission reduction targets. Together with the Eurosystem as a whole, it will be guided by eco-design principles in its work on the future series of euro banknotes and take into account environmental footprint issues in the design of the digital euro currently under preparation.

The decision to step up activities in these areas stems from the ECB’s assessment of climate action implemented since the introduction of the climate plan in 2022 and the adjustment of the work plan to changing circumstances and the improvement of data availability and methodologies.

The planned work in these key areas will complement the ECB's existing climate change-related activities, part of its ongoing tasks, including those related to monetary policy and banking supervision. The ECB will improve its climate-related indicators, risk monitoring and disclosure, and continue to contribute to the development of climate policies in European and international fora. The ECB will continue to review these activities on a regular basis to ensure that they remain fit for purpose and contribute to the fulfilment of its mandate.

A full overview of the planned work programme for 2024 and 2025 can be found in the Annex (in English) and more information is available on the ECB’s website.

For media queries, please contact Verena Reith, tel: +49 69 1344 5737.

Notes

• The ECB must take into account the effects of climate change when carrying out its tasks within its mandate. In addition, without prejudice to its price stability objective, the ECB must support the general economic policies in the European Union in order to contribute to a high level of environmental protection and the improvement of its quality. This includes the objectives of the European Climate Law. In accordance with Article 11 of the Treaty on the Functioning of the European Union, the ECB is also required to integrate environmental protection requirements into the definition and implementation of its policies and activities.
• Following the review of its strategy in 2021 the ECB has integrated climate change considerations into its monetary policy framework.