Press release: 13th April 2021

ClientEarth sues over climate impact of ECB policy

ClientEarth has filed landmark legal action in Belgium to stop ‘quantitative easing’ from European central banks flowing to fossil fuel companies and polluting firms that are exacerbating the climate crisis.

Lawyers from the environmental charity have challenged the central bank of Belgium – the Belgian National Bank – for breaching its legal obligations to take into account environmental protection requirements when buying corporate bonds.

The action challenges a programme developed by the European Central Bank (ECB) and implemented by the central banks of Belgium, Germany, France, Spain, Italy and Finland.

Lawyers allege the so-called Corporate Sector Purchase Programme – developed to improve financing conditions for euro-zone businesses as a form of quantitative easing – undermines the EU’s emission reduction commitments because it favours high emitting companies.

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 contribute the most to climate change. This flies in the face of the bloc’s commitments to mitigate the climate crisis and drastically reduce greenhouse gas emissions.”

Currently €266 billion worth of corporate bonds are held under the programme, and research suggests that well over half of those bonds have been issued by companies in carbon-intensive sectors.

ClientEarth’s lawsuit against Belgium’s central bank asks for a question to be referred to the EU’s top court.

That question would ask the 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.

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.

The litigation comes as the ECB is conducting a review of its monetary policy strategy, due to conclude in September 2021.

ClientEarth lawyers have written to the ECB’s Executive Board and Governing Council reminding them of the ECB’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’s primary mandate is to maintain price stability.  As that stability is threatened by the systemic risks posed by climate change, the central bank must take action to mitigate those risks.

The ECB is also legally required to take into account and act consistently with the EU’s climate objectives and policies, and reduce the climate-related financial risks to which its corporate asset portfolios are exposed.

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 Corporate Sector Purchase 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.”


Notes to editors:

The ECB is both empowered and legally required to take proactive action on climate change for the following reasons:

  • The ECB has a primary mandate to take action to mitigate systemic risks and help prevent them from materialising. Climate change is a systemic risk that threatens both price stability and financial stability.
  • The central bank has to take into account the EU’s climate objectives and policies and ensure it acts consistently with them, which necessarily involves reducing the impact of its programmes on climate change and human rights, and supporting the transition to a net zero economy.
  • The ECB needs to mitigate the climate-related financial risks to which its corporate asset portfolios are exposed.

The principle of ‘market neutrality’ is not enshrined in the EU Treaties and is increasingly recognised as an inappropriate principle to use in regards to the CSPP, especially where markets are not correctly pricing in climate risk.

From ClientEarth’s perspective, in order to be ‘credible’, a company’s Paris-aligned strategy must: (i) be based on a 1.5°C pathway with no or low overshoot; (ii) include short, medium and long-term targets for emissions reductions; and (iii) not rely on unproven or uncosted negative emissions technologies.

While there is currently no market standard alignment methodology, there are a number of methodologies available. ClientEarth recommends that the ECB’s recently established Climate Centre should assess the robustness of existing tools and metrics as part of developing its own process for assessing the alignment of strategies with the Paris Agreement goals.

ClientEarth’s Principles for Paris-alignment can be downloaded here

ClientEarth’s letter to the ECB Executive Board and Governing Council can be accessed here.

About ClientEarth

ClientEarth is a non-profit organisation that uses the law to create systemic change that protects the Earth for – and with – its inhabitants. We are tackling climate change, protecting nature and stopping pollution, with partners and citizens around the globe. We hold industry and governments to account, and defend everyone’s right to a healthy world. From our offices in Europe, Asia and the USA we shape, implement and enforce the law, to build a future for our planet in which people and nature can thrive together.