ABSTRACT
This chapter investigates the legal as well as practical pathways to further align the ECB's monetary policy operations – i.e. credit operations, collateral policy, and asset purchases – with the Sustainable Finance Framework. Beyond addressing climate-related risk, this would also contribute to the creation of a coherent and effective Green European Macrofinancial Regime supporting the Union's green industrial strategy. Provided that the ECB's primary mandate and secondary objectives provide ample space, this chapter outlines three practical pathways for a stronger alignment with the Sustainable Finance Framework. First, the ECB should differentiate lending based on the environmental performance of the underlying economic activity using for instance the Taxonomy Regulation. Second, the ECB should further align the greening of its collateral framework with the Sustainable Finance Framework and, for instance, the Green Bond Standard. Third, the ECB should implement the Sustainable Finance Framework for a stock-based tilting of its balance sheet.
