ECB releases scoring system to reduce bond buying from polluting companies

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By Scott Kanowsky

Investing.com — The European Central Bank on Monday unveiled a new scoring system it will use to reduce holdings of corporate bonds that pose environmental risks.

In a statement, the ECB announced plans to buy up more debt from companies that score high on a three-part test to examine how well their operations follow climate-friendly practices.

The central bank will look at a company’s past climate record and assess how it compares to its competitors. Each company’s decarbonisation targets will be considered, as will the quality of disclosure of its greenhouse gas emissions.

Based on these guidelines, scores are then assigned to companies and these serve to help the ECB determine which debt to take on with funds from maturing bonds.

Preference is given to groups that score well in all three categories. Low performance issuers are not completely excluded from ECB purchases, but are given maturity limits on their debt.

“This will lead to the purchase of more bonds issued by companies with good climate performance and fewer bonds from companies with poor climate performance,” the ECB said, adding that these measures are intended to support the eurozone economy in line with the requirements of the European Union. targets for climate neutrality.

The so-called “tilt” will be applied to all corporate bond purchases that settle from October 1. The ECB also promised to publish climate-related information on these positions from the first quarter of 2023.



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