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ECB Floats Major Shift in Handling of Bonds Based on CO2 Record

Jan. 10, 2023, 3:26 PM

The European Central Bank may be about to make life harder for bond issuers with big carbon footprints.

Executive Board Member Isabel Schnabel suggested the ECB may need to start actively reshuffling corporate-bond holdings to better reflect climate risk. The comments, made during a speech on Tuesday, indicate the ECB would no longer make do with reinvesting in greener debt, but start offloading bonds issued by big greenhouse-gas emitters.

“This announcement is bound to have some spread impact, especially negative for the issuers which lack transition potential,” said ABN Amro Bank NV fixed-income strategist Larissa Fritz. “Once formalized the ...