European Central Bank’s decision to make sustainability-linked bonds eligible as central bank collateral, and to consider including the bonds in asset purchase programs, has been welcomed by money managers. The ECB is also considering making the bonds eligible for asset purchases and the coronavirus-related Pandemic Emergency Purchase Program. The ECB will accept bonds that have coupon structures linked to environmental objectives or one or more of the United Nations’ sustainable development goals related to climate change or environmental degradation.
Sustainability-linked bonds had been excluded from being eligible for the ECB’s asset purchase program “given their coupon payments are linked to a company achieving (key performance indicators) attached to sustainable objectives such as the SDGs. In taking this decision, the ECB shows that its unqualified support goes beyond the EU taxonomy (on sustainable finance), the SDGs and sustainable finance in general.