The greenhouse gas emissions of the Bundesbank’s euro-denominated portfolio (euro portfolio) and reserve assets have been in decline on aggregate over the past years, the Bank reports in its fourth climate-related disclosures. In this report, the Bank looks in particular at the climate performance of its own financial investments. In addition, the Bank reports on how it incorporates sustainability as a strategic factor into its work and research.

Climate change and its consequences can have far-reaching financial implications for financial stability, credit risk and long-term economic developments. Consequently, they affect a central bank’s core tasks. The Bundesbank therefore considers climate-related risks within the scope of its mandate, the Bundesbank’s experts write. If the relevant risks are identified at an early stage, they can be suitably incorporated into strategies and decision-making processes. By regularly analysing and disclosing the potential climate-related risks surrounding its financial investments, the Bundesbank is also creating transparency.

Monetary policy portfolios included in disclosures for the first time

For the first time, the Bundesbank is disclosing greenhouse gas metrics on its shares of the Eurosystem’s monetary policy holdings of corporate and covered bonds. These metrics and the respective national shares were calculated for the Eurosystem by the European Central Bank (ECB) using a standard methodology and provided to the national central banks. In previous years, the climate impact of the monetary policy holdings had been reported solely by the ECB on behalf of the Eurosystem as a whole. 

Sustainability an integral part of the research programme

The Bundesbank’s Research Centre has made sustainability an integral part of its research programme. The focal topic in this year’s climate-related disclosures provides an overview of the Research Centre’s recent findings and analyses in this field. Research topics covered include the macroeconomic impacts of climate change and the transition to a net zero economy. The insights gained from this will aid in achieving a better understanding of climate-related risks and developing appropriate policy approaches,” the experts write, adding that, going forward, the Research Centre will also explore how biodiversity loss affects various sectors of the economy.

Euro portfolio: greenhouse gas emissions trending downwards

According to the report’s authors, the greenhouse gas intensity of the euro portfolio has declined in the period under review since 2021. They note, however, that it is not yet possible to conclusively assess the metrics for 2024 owing to the lack of current data for that year as this report went to press. That trend is also being followed by the carbon footprint, a metric that expresses the greenhouse gas emissions financed by the portfolio in relation to the portfolio volume. 

The main reason for these declines is likely to be that banks are increasingly sourcing electricity from renewable sources, the experts write. As far as the euro portfolio is concerned, the greenhouse gas metrics in question are of limited informative value, the report explains. This is because they only contain the emissions stemming from the operational activities of the commercial banks whose bonds are included in the euro portfolio. In the case of the Bank’s own portfolio, the disclosures do not include the greenhouse gas emissions financed by banks, i.e. the emissions caused by their lending and investment: The data on these emissions are still insufficient, but the situation is likely to improve further in the medium term. This is expected to happen as soon as the new EU disclosure requirements for sustainability information come into effect.

As at the end of 2024, the euro portfolio contained only covered bonds. In this case, these are bonds issued by banks, which are mainly backed by real estate mortgages.

Reserve assets: climate performance still on a positive track

According to the authors, the share of the bonds issued by promotional and development banks held in the Bundesbank’s reserve assets that are used to finance sustainable business activities is still just under one-fifth. These sustainable business activities include, in particular, renewable energy, energy efficiency measures and public transport infrastructure.

As concerns the sovereign bonds within the reserve assets, the report notes that greenhouse gas intensity has been in almost continuous decline since 2015. In 2024, the addition of UK sovereign bonds to the reserve assets also made a small contribution to this. However, if the decline in greenhouse gas intensity observed since 2015 is adjusted for inflation, the drop is only just over half as large, the experts concede. The metric is expressed in relation to gross domestic product adjusted for purchasing power parity.