The differences could hardly be greater.

On 10 January 2023, Jerome H. Powell, chair of the central bank of the USA (Federal Reserve System), recited, without explicit congressional legislation, it would be inappropriate for the Fed to use its monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals.

We are not, and will not be, a „climate policymaker.“

Speech by Jerome H. Powell, Federal Reserve, Panel on „Central Bank Independence and the Mandate—Evolving Views“,10 January 2023

At the same time, member of the ECB’s Executive Board Isabel Schnabel made the following remark:

In line with our mandate, we stand ready to further intensify our efforts to support the fight against climate change, building on the achievements of our climate change action plan.

Speech by Isabel Schnabel, member of the ECB’s Executive Board, Panel on „Central Bank Independence and the Mandate—Evolving Views“,10 January 2023

While Powell himself believes that the Fed has an important responsibility as a supervisor in terms of understanding and appropriately managing climate related financial risks, the Fed emphasizes, that the Fed’s situation is different from that of the European Central Bank (ECB).

While U.S. monetary policy has the dual mandate of maximum employment and price stability, some other central banks have somewhat more expansive mandates. The Bank of England and the European Central Bank both have a primary mandate to maintain price stability but a secondary mandate to support the economic policies of the U.K. government and the European Union, respectively.

Speech by Jerome H. Powell, Federal Reserve, Panel on „Central Bank Independence and the Mandate—Evolving Views“,10 January 2023

The ECB is using its mandate to appeal to the responsibility not only of governments but also of central banks and the ECB in particular.

„While governments need to accelerate their efforts to put the economy on a path towards net zero emissions, the drastic change in the macroeconomic and financial environment over the past year also requires central banks to review the scale and scope of their own contribution to the green transition. Without prejudice to the ECB’s primary mandate of price stability, we are obliged to support the EU’s general economic policies in line with our secondary objective. We must therefore ensure that all of the ECB’s policies are aligned with the objectives of the Paris Agreement to limit global warming to well below 2 degrees Celsius.“

Speech by Isabel Schnabel, member of the ECB’s Executive Board, 10 January 2023

According to Schnabel, the long-term goal of the ECB is to make sure that all of its monetary policy actions are aligned with the objectives of the Paris Agreement. The monetary policy framework shall be climate change-proof including greening of its stock of bond holdings and public sector bonds, as well as the ECB’s lending operations and collateral framework. Furthermore, the ECB has already started to integrate climate change considerations into its macroeconomic models and will increasingly address climate risks in its risk control and collateral frameworks.

In this environment, fiscal policy needs to remain in the driving seat when it comes to fighting climate change.

Speech by Isabel Schnabel, 10 January 2023

On 24 January 2023, the ECB has published new climate-related statistical indicators to narrow climate data gap and to help analyse climate-related risks in financial sector and monitor green transition. These new climate-related indicators shall be another step towards delivering on the ECB’s climate commitments. The indicators aim to better assess the impact of climate-related risks on the financial sector and to monitor the development of sustainable and green finance. The climate data gap is seen as crucial to make further progress towards a climate-neutral economy (Sustainable Finance & ESG-Reporting: How to measure and disclose risks, opportunities and data?).

In line with its mandate, the European Central Bank (ECB) is committed to addressing climate change. This includes managing climate-related risks to monetary policy and to the financial system, supporting the green transition, and enhancing transparency on climate-related matters. To do this effectively, high-quality data and aggregate indicators are needed.

ECB, Towards climate-related statistical indicators, January 2023

The indicators were constructed using harmonised methodologies across euro area countries. But they are a work in progress. They are intended to start a broader conversation within the statistical and research community and with other key stakeholders on how to better capture data on climate-related risks and the green transition. Therefore, the use of these indicators is subject to a number of caveats. The ECB, together with the national central banks, intends to improve the methodology and the data used and new data sources, expected to become available in line with EU initiatives on climate-related disclosures and reporting, shall help in this respect. Specifically, the indicators cover three areas:

  • Sustainable finance indicators provide an overview of debt instruments labelled as “green”, “social”, “sustainability” or “sustainability-linked” by the issuer that are issued or held in the euro area. These indicators provide information on the proceeds raised to finance sustainable projects and hence the transition to a net-zero economy. The data show that the volume of sustainable and green bonds has more than doubled over the last two years and grew much faster than the overall euro area bond market. Remaining limitations are mostly due to the lack of internationally accepted harmonised definitions of certain concepts (see also: Sustainable Finance & ESG-Reporting: How to measure and disclose risks, opportunities and data?).
  • Carbon emission indicators of financial institutions provide information on the carbon intensity of the securities and loan portfolios of financial institutions and thus help to assess the sector’s role in financing the transition to a net-zero economy and related risks.
  • Indicators on the physical risks of loan and security portfolios assess risks stemming from the impact of climate change-induced natural hazards, such as floods and wildfires, on the performance of loans, bonds and equities.

Several regulatory initiatives in the EU will generate new data as a result of new reporting requirements for financial and non-financial institutions concerning sustainability and climate information. These include the Sustainable Finance Disclosure Regulation (SFDR), which will substantially increase the amount of public climate disclosures for environmental, social and governance (ESG) funds. In addition, the entry into force of the EU Taxonomy Regulation will require large financial and non-financial institutions to publish a large number of performance indicators related to their alignment with the taxonomy criteria. Finally, future reporting requirements linked to the Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS) are likely to substantially increase the availability of granular, externally verified, corporate-level, climate-related information and should allow a better assessment of the exposures of financial institutions’ counterparties to transition and physical risk.

ECB, Towards climate-related statistical indicators, January 2023


Already in 2022, the European Insurance and Occupational Pensions Authority (EIOPA) had announced, that it will strive to become a centre of expertise in the identification and assessment of sustainability risks, to add value to the efforts of (re)insurers and occupational pension funds in the mitigation and adaptation to climate change and other sustainability risks, including greenwashing-related risks.

In its opinion on the draft European Sustainability Reporting Standards (ESRS) of 26 January 2023 the European Banking Authority (EBA) also emphasised the importance of consistency between the exposure draft ESRS and the standards being developed by the International Sustainability Standards Board (ISSB):

Having a good alignment between the two sets of standards is considered key to ensure comparability between European entities, implementing ESRS, and the international entities applying the International Sustainability Reporting Standards. Amongst many other benefits that this comparability may bring it will, in particular, allow credit institutions to gather relevant “environmental, social and governance” (ESG) information from non-European investee companies that will be relevant to comply with the Sustainable Finance Disclosures regulation (SFDR).“

© Copyright by Dr. Elmar Bickert