Decision (EU) 2024/190 of the European Central Bank of 15 December 2023 amending Decision (EU) 2016/948 on the implementation of the corporate sector purchase programme (ECB/2016/16) (ECB/2023/38)

Amendments

Article 1

Decision (EU) 2016/948 (ECB/2016/16) is amended as follows: (1) Article 4a is replaced by the following: ‘Article 4a Incorporation of climate change considerations into the benchmark allocation 1.   The benchmark allocation referred to in Article 4(3) shall incorporate climate change considerations, in particular in order to manage the Eurosystem’s exposure to climate-related financial risks, in accordance with the methodology approved by the Governing Council, including the elements thereof set out in the Annex. 2.   The Governing Council may, when it considers it necessary to do so, review the methodology referred to in paragraph 1, in particular in order to take into account climate-related financial risks and the advancement in risk assessment capabilities.’ ; (2) the text set out in the Annex to this Decision is added as an Annex.

Entry into force

Article 2

This Decision shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union .

ANNEXSupplementary provisions

ANNEX The following Annex is added to Decision (EU) 2016/948 (ECB/2016/16): ‘ANNEX CLIMATE SCORING METHODOLOGY AND TILTING APPROACH 1.   CLIMATE SCORING METHODOLOGY For each issuer, a score to assess its climate performance (the ‘climate score’) is computed based on three metrics: the disclosure metric, the backward-looking metric and the forward-looking metric, in accordance with a formula determined by the Governing Council. The climate score ranges from a minimum of zero to a maximum of five and focuses on climate-related financial risks estimated based on (a) the quality of the issuer’s disclosures, (b) the issuers’ recent emissions intensities  ( 1 ) and (c) the issuer’s climate-related targets. The higher the score, the better the assessed climate performance. 1.1.    The disclosure metric The disclosure metric assesses the quality of disclosures by issuers in respect of their scope 1 and scope 2 greenhouse gas emissions as referred to in the Greenhouse Gas Protocol  ( 2 ) , in accordance with a formula determined by the Governing Council. The disclosure metric rewards issuers with high-quality disclosures. Issuers receive a better score under this metric when their disclosures have been subject to third party verification. Issuers receive the poorest score if they have no self-reported emissions data. 1.2.    The backward-looking metric The backward-looking metric assesses the level of the issuers’ past greenhouse gas emissions both in terms of the level of emission intensity and the rate of decarbonisation. This metric takes into account the issuers’ scope 1 and scope 2 greenhouse gas emissions intensities and sector averages of scope 3 greenhouse gas emissions intensities. It combines a best-in-class with a best-in-universe approach, in accordance with a methodology determined by the Governing Council. The best-in-class approach compares companies against their peers within specific industry sectors. The best-in-universe approach compares companies across the entire corporate universe with respect to both their point-in-time emissions intensities, and the rate of decarbonisation. 1.3.    The forward-looking metric The forward-looking metric assesses the expected evolution of the issuers’ greenhouse gas emissions intensities. Factors leading to a higher score under this metric include the level of ambition and the credibility of the issuers’ stated greenhouse gas emissions intensity reduction targets (particularly if the target is science-based and has been validated by a third party) and observed adherence to their own greenhouse gas emissions intensity reduction targets, as assessed in accordance with a methodology determined by the Governing Council. 2.   TILTING APPROACH Purchases of corporate bonds are tilted towards issuers with higher climate scores in accordance with a formula determined by the Governing Council. Tilting means that the market capitalisation weighted share of assets in the benchmark guiding Eurosystem corporate sector purchases will be increased for issuers with a better climate score relative to those issuers with poorer climate scores. The tilted benchmark is incorporated into issuer group limits to ensure that purchases are guided by the tilted benchmark. ’. ( 1 )   The emissions intensity for an issuer is defined as the issuer’s greenhouse gas emissions (in tCO 2 ) divided by the issuer’s revenue (in EUR millions). ( 2 )   The Greenhouse Gas Protocol distinguishes between direct greenhouse gas emissions of companies from owned or controlled sources (scope 1); indirect emissions from purchased or acquired electricity, steam, heating or cooling (scope 2); and all other indirect emissions, including in particular those occurring along the corporate value chain, either upstream or downstream (scope 3): see the Greenhouse Gas Protocol website at ghgprotocol.org.