France’s central bank has pledged to green its balance sheet


Last week FT Alphaville wrote that for all their talk of going green, central banks weren’t putting their money where their mouth is.

It’s not all hot air as it turns out. The Banque de France earlier this week promised to green the €22bn-worth of assets that it does not hold for monetary policy purposes — which mainly consists of a €14bn pension fund for its employees, along with some other portfolios it manages.

The central bank will take three specific measures. First, it will make what it describes as a “definitive exit” from all companies with a coal-related activity before the end of 2024. By then it will also exclude all companies whose turnover is at least 10 per cent from oil, and similarly for companies where gas is more than half of revenues. Lastly, it will exercise its voting rights to go against new projects to develop fossil fuels. The bank says about 1.5 per cent of the assets it holds are related to fossil fuels.

The bank is the first in the eurozone to make responsible investment commitments. The Swiss National Bank — which already excludes investments in companies that cause severe environmental damage, violate human rights or produce condemned weapons — said in December that it would phase out all companies primarily active in the mining of coal from its portfolios.

Of course, a far more important step would be for the European Central Bank to do the same to the assets it holds under its €3tn quantitative easing programme — in which the Banque de France, along with the other major central banks in the currency zone, participate. Of the €3tn, around 8 per cent is held in the form of corporate bonds. Of that €250bn, the exact portion held in companies in the fossil fuel industry is unknown. But a Greenpeace report which looked at purchases made between March and May last year and found that of the €30bn made, €12.4bn — around 40 per cent — were from companies with a significant chunk of their revenues related to fossil fuels.

Ditching these assets is far trickier. While ECB president Christine Lagarde has made clear that she wants to see progress here, hawks on the policy-setting governing council are wary of overstepping the mark and believe responsibility for greening the economy should lie with lawmakers. The scale of the purchases also means there is a far higher risk of market disruption should the ECB go the same way as the Banque de France.

Still the pressure on the eurozone’s monetary guardians is mounting. At the very least, we’d expect more central banks to follow the France’s lead in the coming months.


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