ECB Adds Climate Risk Factor to Collateral Rules

ECB Adds Climate Risk Factor to Collateral Rules

The ECB introduces a climate factor into the collateral framework for refinancing operations. Bonds of companies most exposed to climate risks will be subject to an additional haircut, or margin call. For Frankfurt, transition risk is now a financial risk that must be integrated into the monetary policy framework. Here’s how the new mechanism works and what impact it will have on the financial system. The European Central Bank has started applyi…