The cross : ECB President Christine Lagarde recently spoke out in favor of greening monetary policy through the purchase of green bonds. What do these titles correspond to?

Nathalie Janson: Green bonds are loans, issued on the market by a company or a public entity to investors, which make it possible to finance projects contributing to the ecological transition. In 2016, WWF estimated that only an obligation for which the issuer can demonstrate tangible and measurable environmental benefits, certified by an independent body, should be considered green.

The problem is that the ecological character of some projects is questionable and for the moment without legal basis. Several players are competing for the privilege of labeling projects as “green”, each with different criteria. The mention “green” is not subject to any verification or constraint of use, it is subject to the drifts of “greenwashing” (or “greenwashing”, that is to say the fact of presenting a product as ecological without this is reflected in the facts, Editor’s note).

Are there criteria allowing investors to find their way around?

NJ: The European Union has undertaken work to define the criteria for determining whether a project is green: this is the work of “green taxonomy”. This work is still in progress, in particular to better identify the environmental impact of each project. It is a complex issue. Consider, for example, the ongoing debates on the environmental benefits of hydrogen or electric cars.

Should the ECB green its portfolio?

NJ: The central bank has one main mission: to maintain price stability, in other words to safeguard the euro, and to ensure the stability of the financial system. In the context of the current crisis, its priority is to ensure the effectiveness of the transmission of its monetary policy, in particular to the banks which have to deal with the increase in credit risk.

Conceptually, we can still imagine that climate change posing a risk to the financial world, this can justify the enlargement of the ECB’s scope of action. But in my opinion, it is not intended to lead a “greener” policy.

Why ?

NJ: Because this would induce valuation bias: certain securities would then be recognized as “good” to hold in order to obtain liquidity. If the ECB starts to publish a list of this type of securities, it will cause a homogenization of bank balance sheets and investor portfolios, which will accentuate systemic risk. It would then achieve its goal of greening, but at the cost of distortion.

I would add that the major climate risks are already taken into account by the financial markets, which did not wait for the ECB to launch the green finance movement. It seems to me preferable that it maintains a neutral economic approach and does not fall into political marketing.


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