Climate Objectives in Central Banks’ Funding Operations: how close to Green TLTROs?

Refinancing operations are a core monetary policy tool to provide liquidity for credit institutions. Recently, some central banks, such as the Bank of Japan (BoJ), have started to align their objectives with the goal of a transition to a low-carbon economy, linking its monetary policy to climate change objectives

Key points

• Key points:
• The BoJ has been the first to launch green liquidity operations, but in our view the definition of what is “green” seems quite loose and it remains to be seen the appetite of banks for such operations
• The ECB has been very vocal in assuming a clear role in the fight to climate change, in its strategy review the ECB concludes that certain obstacles must be overcome in order to be able to launch these green TLTROs with minimum guarantees
• Green TLTROs seems to be in the roadmap of the ECB but not to be released in the short term. The ECB is aware that, when appropriate, it should be announced with a timely communication and a sufficiently long adaptation period which makes one think that they would never go as fast as the BoJ

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