Climate change poses significant risks to price stability via structural and cyclical effects on the economy and financial system. The ECB Governing Council is committed to integrating climate and nature considerations into its mandate, but sustainability data from the private sector is crucial for financial markets. Without this information, we will still face high uncertainty in data and estimations of climate-related physical and transition risks.

Christine Lagarde reiterates the ECB’s commitment but highlights the risks of reduced corporate reporting requirements on the effectiveness of climate-related monetary policies. The ECB stresses the need for amendments that balance proportionality with retaining the benefits of sustainability reporting for the economy and financial stability.The proposed reduction in reporting scope would limit firm-level data, weakening the ECB’s ability to assess risks at granular levels. Delays in CSRD national transpositions could further hinder implementation.

Key measures are being taken through the integration of climate considerations into monetary policy (since 2021), where climate risks are considered systematically and rule-based. This improves general risk assessment and collateral frameworks for assessing climate risks.

• Since 2024: climate factors have been included in in-house credit assessments by national central banks.
• Since 2022: climate risks have been factored into haircut reviews in collateral.
• Since 2021: sustainability-linked bonds have been accepted as collateral.
  Collateral Pool Limits (announced 2022, abandoned 2024) were intended to cap high-carbon asset concentration, but the measure was dropped due to lack of granular emissions and sector-level data.

The new “Climate Factor” (announced July 2025) is set to be implemented in the second half of 2026. It applies to marketable assets issued by non-financial corporations and reduces effective collateral value depending on sector, issuer, and asset-specific climate risk. Importantly, it provides a buffer against uncertainties in the green transition.

The climate factor will be regularly reviewed and recalibrated with better data and evolving regulation. It aligns with the ECB’s Climate and Nature Plan 2024–2025 and depends on corporate sustainability data — the need for high-quality climate data is essential for the Eurosystem’s frameworks.