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ClientEarth Communications

13th April 2021

Climate finance

Why ClientEarth is suing the central bank of Belgium for climate failings

ClientEarth is taking landmark legal action to stop 'quantitative easing' from European central banks flowing to fossil fuel companies and polluting firms.

We’ve launched a lawsuit against the Belgian National Bank for failing to fulfil environmental protection and human rights requirements when purchasing corporate assets, many of which are from companies that are fuelling the climate crisis.

These purchases are made through the Corporate Sector Purchase Programme – a programme developed by the European Central Bank that directs capital to some of Europe’s most polluting sectors.

It was established in 2016 to improve financing conditions for Eurozone businesses, and is implemented by the central banks of Belgium, Germany, France, Spain, Italy and Finland.

But fossil fuel companies are in fact among the biggest benefactors, with more than half of the $266 billion of assets held under the programme issued by high emitting firms.

We believe this programme to be invalid due to its environmental and human rights costs.

ClientEarth lawyer Jamie Sawyer said: “By buying up carbon intensive bonds, the Belgian National Bank is providing some of Europe’s worst polluters with access to cheap finance and facilitating the expansion of their climate damaging activities.

"Central banks in the EU are legally obliged to contribute to the protection of our environment and respect human rights, but instead they are directing capital into sectors that fuel the climate crisis. This flies in the face of the bloc’s commitments to mitigate climate change and drastically reduce greenhouse gas emissions."

What does the legal action mean?

ClientEarth’s lawsuit against Belgium’s central bank was filed in Belgian courts, but it asks for a question to be referred to the European Court of Justice.

That question would ask the EU’s top court to decide whether the ECB’s purchase programme is valid or invalid, in order to determine whether the Belgian National Bank’s actions carried out under that policy are legal.

We argue that the ECB’s decision establishing the programme failed to assess the climate impact of buying these corporate assets despite its legal obligations to do so.

If found to be invalid, ClientEarth asks the court to order the Belgian central bank to stop purchasing bonds under the programme. The ECB would have to take all measures appropriate to remedy the illegality.

ECB Monetary Policy Strategy Review

ClientEarth’s challenge comes as the ECB is conducting a significant review of its Monetary Policy Strategy – with its response to climate change being a primary focus.

The central bank’s approach to the purchasing programme has so far been centred on "market neutrality", but our lawyers argue that this has given rise to inherent carbon bias.

They have written to the ECB’s Executive Board and Governing Council reminding them of the central bank’s legal obligations related to climate change and urging them to use the strategy review as an opportunity to reform the purchase programme.

The ECB needs to stop using the myth of ‘market neutrality’ to justify purchasing assets of climate-wrecking companies and must take immediate action to align its monetary policy with the goals of the Paris Agreement.

Jamie Sawyer, ClientEarth lawyer said.

Our reform recommendations

ClientEarth’s letter to the ECB includes three recommendations to urgently decarbonise the ECB’s corporate bond purchases and align the programme with the Paris Agreement goals:

  • The purchasing programme should immediately exclude companies whose activities are clearly incompatible with achieving the Paris Agreement goals or are associated with high transition risk, such as coal and unconventional oil and gas;
  • The ECB should cease or restrict purchases of bonds from carbon intensive companies if they do not adopt by January 2023 a credible Paris-aligned strategy to achieve net zero emissions; and,
  • The ECB should set a comprehensive strategy on how it will align its monetary policy portfolios and activities with the Paris goals. It should issue a report annually disclosing its progress, in line with the Recommendations of the Task Force for Climate-related Financial Disclosures – a global standard for climate-related reporting.

"The ECB needs to stop using the myth of 'market neutrality' to justify purchasing assets of climate-wrecking companies and must take immediate action to align its monetary policy with the goals of the Paris Agreement," Sawyer added.

"We urge the ECB's Executive Board and Governing Council not to waste the significant opportunity provided by the strategy review to ensure the central bank’s purchasing programme works to mitigate climate change, rather than contribute to it."

ClientEarth's letter to the ECB can be accessed here.

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