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ECB releases scoring system to reduce bond purchases from polluting companies

Scott Kanowsky — The European Central Bank on Monday unveiled a new scoring system it will use to reduce its holdings of corporate bonds with environmental risks.

In a statement, the ECB laid out a plan to buy more debt from companies that score high on a three-part test that examines how they operate in How well are you doing in terms of climate-friendly practices.

The central bank will look at a company’s past climate records and judge how it compares to its peers. Each company’s decarbonization goals will be considered, as well as the quality of its disclosure of GHG emissions.

Scores will then be assigned to companies based on these guidelines and help the ECB determine which debt it should snap up with funds from maturing bonds.

Preference will be given to groups that score well in all three categories. Underperforming issuers will not be completely excluded from the ECB’s purchases, but will have maturity restrictions imposed on their debt.

“This will lead to more purchases of bonds issued by environmentally sound companies, measures designed to support the euro area economy in line with the EU’s climate neutrality goals, the ECB said.

so-called “tilt” will apply to all corporate bond purchases settled as of October 1, it added. The ECB has also pledged to publish a climate change on these assets from the 2023 first quarter Related Information.



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