The role of the European Central Bank in a sustainable financial system

Bachelor Thesis , 2020 , 51 Pages , Grade: 1,3

Business economics - Banking, Stock Exchanges, Insurance, Accounting

To pursue a sustainable financial system, it will be essential to involve the financial sector, as well as its participants and authorities. This thesis discussed the role the European Central Bank could play in a transition towards a sustainable financial system. It outlined how climate-related risks can spread to the financial system and why central banks are concerned of them. While introducing possible instruments for a proactive role of the ECB in different policy areas, the thesis also pointed out the restrictions and risks of the ECB to engage. Next to the possible endangering of their institutional independence, the mandate of the ECB was investigated.

Table of contents

List of abbreviations

1. Introduction

2. A sustainable financial system
2.1 The link between climate change and the financial system
2.2 Climate change and central banks
2.2.1 The role of central banks
2.2.2 Climate change and price stability
2.2.3 Climate change and financial stability
2.2.4 Climate change and portfolio management
2.3 The European Green Deal
2.3.1 Main aspects of the European Green Deal

3. The possible roles of the ECB in a sustainable financial system
3.1 Objectives and mandate of the ECB
3.2 The strategy of the ECB
3.3 The role of soft power of the ECB
3.3.1 Voluntary green finance guidelines and frameworks
3.3.2 Disclosure of the ECB carbon impact
3.4 The role of the ECB in macroprudential regulation
3.4.1 Climate-related stress tests
3.5 The role of the ECB in microprudential supervision
3.5.1 Disclosure requirements
3.5.2 ESG risk management standards
3.6 The role of the ECB in monetary policy
3.6.1 Green quantitative easing (GQE)
3.6.2 Green collateral framework

4. Restrictions of the ECB to engage
4.1 The role of independence
4.2 The connection of climate risk and credit risk
4.3 The ECB mandate and conflicting objectives

5. An evaluation of instruments - the PCT approach
5.1 An assessment of two instruments using the PCT approach

6. Conclusion

List of references

List of figures

• College: University of Applied Sciences Darmstadt
• Grade: 1,3
• Author: Nele Braun (Author)
• Publication Year: 2020
• Pages: 51
• Catalog Number: V1007537
• ISBN (eBook): 9783346392091
• ISBN (Book): 9783346392107
• Language: English
• Tags: Sustainable Finance, European Central Bank, Sustainability, Climate Change, Green Finance