The European Central Bank (ECB) announced the introduction of a new measure to manage climate risk within the EU’s central banking system, or “the Eurosystem,” with plans to add a “climate factor” within the collateral framework to protect against potential decline in value of collateral in event of adverse climate-related transition shocks.
The new climate factor could potentially reduce the value assigned by the Eurosystem on assets exposed to climate transition risks, lowering the amount that the system would be willing to lend against those assets.
According to the ECB, the launch o…
