ECB To Accept Sustainability-Linked Bonds As Collateral
- Bonds with coupons linked to sustainability performance targets to become eligible as central bank collateral
- Potential eligibility also for asset purchases under the APP and the PEPP subject to compliance with programme-specific eligibility criteria
- Decision applicable from 1 January 2021
The European Central Bank (ECB) has decided that bonds with coupon structures linked to certain sustainability performance targets will become eligible as collateral for Eurosystem credit operations and also for Eurosystem outright purchases for monetary policy purposes, provided they comply with all other eligibility criteria.
We support innovation in the area of sustainable finance! The ECB has decided to accept sustainability-linked bonds as collateral for Eurosystem credit operations as of 1 January 2021. Full press release https://t.co/1DvTAT9BiZ
— European Central Bank (@ecb) September 22, 2020
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 United Nations Sustainable Development Goals relating to climate change or environmental degradation. This further broadens the universe of Eurosystem-eligible marketable assets and signals the Eurosystem’s support for innovation in the area of sustainable finance.
Non-marketable assets with comparable coupon structures are already eligible. The decision aligns the treatment of marketable and non-marketable collateral assets with such coupon structures.
The decision applies from 1 January 2021.
Volumes of sustainable debt surpassed $1.6 trillion in 2021.
The consolidated quote system for corporate bonds has raised funds to expand outside the US.
It is important to maintain the voluntary nature of the standard.
Proposed changes would lead to an unsustainable level of additional cost and liability for issuers.
Bond funds saw strongest inflows since 2016.