ECB provides details on how it aims to decarbonise its corporate bond holdings

In Short

The ECB published today the details of its decarbonisation process. It will be based on an issuer-specific climate score integrating both a backward-looking and forward-looking component as well as a data disclo-sure quality score.

Highlights:

  • The ECB published today the details of its decarbonisation process. It will be based on an issuer-specific climate score integrating both a backward-looking and forward-looking component as well as a data disclosure quality score.
  • The central bank has not provided any information on the origin of the scores to be used.
  • The corporate bond purchases will be tilted towards issuers with better scores starting 1 October 2022, not triggering any loss of eligibility for now. Still, the ECB will now impose maturity limits on bonds from lower-scoring issuers. The comparison versus the average portfolio score may penalise sectors with the heaviest emissions based on our analysis of Utilities, Materials, and Energy.
  • While this is a crucial step for the ECB, the fact that the quantitative tightening is fast approaching, potentially reducing the reinvestments in the APP already in Q123, may reduce the market impact that could have been initially envisaged. That being said, as most private investors are concomitantly attempting to improve the carbon footprint of their portfolio, we are still expecting the “E” component of the ESG scores to further feed into credit market valuations.
     

Read the full publication below

ECB provides details on how it aims to decarbonise its corporate bond holdings
Picture

© Generali Investments, all rights reserved. This website is provided by Generali Investments Holding S.p.A. as the holding company of the main asset management companies of the Generali Group having, directly or indirectly, the majority shareholding in the companies listed below (hereinafter jointly, “Generali Investments”). This website may contain information related to the activity of the following companies: Generali Asset Management S.p.A. Società di gestione del risparmio, Infranity, Sycomore Asset Management, Aperture Investors LLC (including Aperture Investors UK Ltd), Plenisfer Investments S.p.A. Società di gestione del risparmio, Lumyna Investments Limited, Sosteneo S.p.A. Società di gestione del risparmio, Generali Real Estate S.p.A. Società di gestione del risparmio, Conning* and among its subsidiaries Global Evolution Asset Management A/S - including Global Evolution USA, LLC and Global Evolution Fund Management Singapore Pte. Ltd - Octagon Credit Investors, LLC, Pearlmark Real Estate, LLC as well as Generali Investments CEE. *Includes Conning, Inc., Conning Asset Management Limited, Conning Asia Pacific Limited, Conning Investment Products, Inc., Goodwin Capital Advisers, Inc. (collectively, “Conning”).