The American Federal Reserve (Fed) and the European Central Bank (ECB) have sent out remarkably contradictory signals in the past few days: While Fed Chairman Jerome Powell emphasized that his central bank is not pursuing any climate policy, ECB Executive Board member Isabel Schnabel presented concrete concepts such as the ECB could step up its green transformation efforts.

Christian Siedenbiedel

Editor in Business.

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So far, the central bank of the euro area has only applied green criteria for bond purchases if paper from the corporate bond program matures and the money is reinvested.

This is a relatively small sector, which is also losing importance because the central bank has not bought any additional bonds since July of last year – and from March this year onwards it also wants to slowly reduce reinvestments.

Schnabel has therefore put up for discussion that the central bank could also actively invest in corporate bonds – and government bonds.

There's a lot at stake: In total, the central banks of the Eurosystem have bought bonds for almost 5 trillion euros in recent years.

If you start to shift the green criteria, it would undoubtedly be about a different dimension than the previous cautious attempts to reinvest the money from corporate bonds.

Schnabel himself had already mentioned some of the difficulties that could arise.

A big one, however, would be: While companies will probably have to put up with being divided into “green” and “less green” using a scoring system, a similar procedure for categorizing the member states of the European Monetary Union would certainly lead to an outcry.

Schnabel's proposal was to initially focus heavily on green bonds from supranational institutions - and later on government bonds explicitly issued as "green".

Austria's central bank chief expressed his approval

The reactions of the national central banks were very cautious.

The Deutsche Bundesbank did not comment at all when asked.

"No comment," said the Spanish central bank.

The head of the Austrian central bank, Robert Holzmann, on the other hand, showed a certain understanding for Schnabel's concern to actively reallocate the bond holdings according to green criteria if not so much will be reinvested in the future: "The primary mandate of a central bank is to ensure price stability.

In order to ensure this, it is essential that the green change in the economy – the so-called 'green transition' – succeeds,” said Holzmann.

The governments and of course the companies themselves are particularly in demand here, explained the head of the Austrian central bank: “In this sense, I can only fully support the statements made by Isabel Schnabel in Stockholm.”

Economists, on the other hand, argue whether the proposals are effective.

"Ms. Schnabel's speech surprised me," said Karsten Junius, chief economist at Bank J. Safra Sarasin: "The willingness to pursue a green monetary policy actually goes much further than that of the American Federal Reserve."