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ECB to consider 'climate factor' when lending to banks
Published by Global Banking and Finance Review
Posted on July 29, 2025
2 min readLast updated: January 22, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on July 29, 2025
2 min readLast updated: January 22, 2026
The ECB will incorporate climate change into its lending operations by 2026, pressuring banks to support greener sectors. This new policy introduces a climate factor affecting asset collateral values.
FRANKFURT (Reuters) -The European Central Bank will add climate change considerations to its lending operations from late 2026, it said on Tuesday, raising pressure on banks to channel financing towards greener sectors as the euro zone seeks to reduce its carbon footprint.
The ECB regularly lends to banks on both shorter and longer durations against appropriate collateral, and while such lending has been muted in recent years, an uptick is expected as the bank slowly reduces excess liquidity in the financial system.
"The Governing Council has decided to introduce a 'climate factor' which could reduce the value assigned to eligible assets pledged as collateral, depending on the extent to which an asset can be impacted by these uncertainties," the ECB said in a statement.
The new policy, set to come into effect in the second half of 2026, is expected to act as a buffer against the possible financial impact of uncertainties related to climate change, it said.
While the U.S. Federal Reserve earlier this year left a global initiative looking at ways to police climate risk in the financial system, the ECB doubled down on its own commitment to take climate risk into account.
The bank has already been pushing commercial lenders to disclose more and more of their climate-related risk and has often complained that they have been too slow to respond. It has threatened to fine banks if they do not comply.
The ECB's new "climate factor" will focus on marketable assets issued by non-financial corporations and adverse events specifically associated with the green transition, the bank said.
(Reporting by Balazs Koranyi;Editing by Andrew Heavens and Helen Popper)
The new policy is set to come into effect in the second half of 2026.
The climate factor aims to reduce the value assigned to eligible assets pledged as collateral, depending on their vulnerability to climate change impacts.
The ECB has been pushing commercial lenders to disclose more of their climate-related risks and has expressed concerns over their slow response.
The new policy will focus on marketable assets issued by non-financial corporations and adverse events specifically associated with the green transition.
While the U.S. Federal Reserve opted out of a global initiative on climate risk, the ECB has reaffirmed its commitment to addressing climate risks in the financial system.
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