29th November 2022
Last year, we took the Belgian National Bank to court for directing cheap finance toward some of the worst polluters in Europe.
The central bank was buying bonds issued by companies like fossil fuel and utility giants Eni, EDP and Schlumberger under an EU-wide scheme known as the Corporate Sector Purchase Programme (CSPP).
Through these purchases, the Belgian central bank was indirectly supporting polluting industries and providing companies with favourable lending conditions that allowed them to continue expanding harmful business activities.
Our case argued this breached its environmental protection and human rights obligations, and sought to cut off central bank support for corporations that are wrecking the planet.
But that all changed in September when the European Central Bank (ECB) updated the policy to bring it in line with the action needed to curb catastrophic global heating.
Although the changes should go further, they marked a huge step forward in addressing EU central banks’ role in driving climate breakdown, and crucially, remedied the specific illegality our lawsuit alleged.
We have therefore withdrawn the case, but the job isn’t done. We will be watching the ECB’s next steps closely to ensure the reformed programme is effectively implemented.
Our case forced the ECB to confront whether it could legally continue to direct finance to some of Europe’s worst polluters in the face of a climate emergency – Jamie Sawyer, ClientEarth lawyer.
The corporate bond programme currently holds €345 billion worth of corporate debt, more than half of which comes from carbon-intensive sectors.
Our case argued that the programme was designed without taking into account climate considerations as required by EU law; was inconsistent with EU climate policy; and undermined the bloc’s emissions reduction targets – making it invalid.
Unfortunately, the court rejected our arguments on procedural grounds. But, critically, it didn’t answer the key question of whether the CSPP was valid – so we appealed.
Under the reforms, central banks’ corporate bond purchases will be ‘tilted’ away from companies with poor climate performance in favour of those with better ones. Companies will be scored based on their past emissions, their targets to reduce emissions, and the quality of their climate disclosures.
Although this is a welcome shift in position, our lawyers are still concerned about the scheme’s climate impact: fossil fuel companies and other polluting firms could continue to receive support from central banks.
The ECB now needs to take steps to address the companies in the Eurosystem’s corporate bond portfolios that are pursuing fossil fuel expansion or do not have a credible transition plan in place.
And we will not rule out further action if it fails.