Dear Mr Schreiber,

 

would like to inform you that on 25 August 2020, after having finalised the reply to your request with in relation to documents which contain the following information: (1) The amount and value of CSPP and PEPP assets and purchases linked to fossil fuel companies; (2) The amount and value of CSPP and PEPP assets and purchases linked to the companies listed on the Global Coal Exit List; and (3) The distribution of CSPP and PEPP assets and purchases by sector or activity, your confirmatory application of 1 July 2020 for European Central Bank (ECB) documents which contain the separate bond value of CSPP and PEPP assets held by the ECB and the Eurosystem has started being processed.

 

This request will be answered within 20 working days (ECB holidays excluded) in accordance with the Decision of the European Central Bank of 4 March 2004 on public access to European Central Bank documents (BCE/2004/3):

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:02004D0003(01)-20150329&from=ES

 

Yours sincerely,

Compliance and Governance Office

DG Secretariat

European Central Bank

Sonnemannstrasse 20

60314 Frankfurt am Main

[Emailadresse]

 

 

From: Access to documents
Sent: 13 August 2020 16:45
To: ask+[Emailadresse]
Cc: Access to documents
Subject: [EXT] Your confirmatory application for access to documents relating to the separate bond value under CSPP and PEPP

 

Dear Mr Schreiber,

 

We would like to inform you that your confirmatory application of 1 July 2020 for European Central Bank (ECB) documents which contain the separate bond value of CSPP and PEPP assets held by the ECB and the Eurosystem has been put on hold until our reply to your request of 22 April 2020, being processed since 30 June 2020, for access to European Central Bank (ECB) documents related to documents which contain the following information: (1) The amount and value of CSPP and PEPP assets and purchases linked to fossil fuel companies; (2) The amount and value of CSPP and PEPP assets and purchases linked to the companies listed on the Global Coal Exit List; and (3) The distribution of CSPP and PEPP assets and purchases by sector or activity, has been finalised.

 

Please rest assured that once the reply to your second request has been finalised, we will start with the assessment of your confirmatory application of 1 July 2020.

 

We thank you for your understanding and apologize for the inconvenience this additional delay may cause.

 

Yours sincerely

 

Compliance and Governance Office

DG Secretariat

European Central Bank

Sonnemannstrasse 20

60314 Frankfurt am Main

[Emailadresse]

 

From: Access to documents
Sent: 03 July 2020 17:24
To: ask+[Emailadresse]
Subject: RE: [EXT] Acknowledgement of receipt of confirmatory application - Internal review of access to documents request - Disclosure of separate bond value under CSPP and PEPP

 

Dear Mr Schreiber,

 

Thank you for your confirmatory application of 1 July 2020, for access to European Central Bank (ECB) documents.

In accordance with Decision ECB/2004/3 on public access to ECB documents, as last amended, you will receive a reply within 20 working days.

 

Yours sincerely

 

Compliance and Governance Office

DG Secretariat

European Central Bank

Sonnemannstrasse 20

60314 Frankfurt am Main

[Emailadresse]

 

 

 

________________________________________

From: Paul Schreiber

Sent: Wednesday, 01 July 2020 14:47:49 (UTC+01:00) Amsterdam, Berlin, Bern, Rome, Stockholm, Vienna

To: [Emailadresse]

Subject: [EXT] Internal review of access to documents request - Disclosure of separate bond value under CSPP and PEPP

 

Dear European Central Bank,

 

Please pass this on to the person who reviews confirmatory applications.

 

I am filing the following confirmatory application with regards to my access to documents request 'Disclosure of separate bond value under CSPP and PEPP'.

 

I am dissatisfied with the ECB's refusal (LS/PS/2020/21) to provide access to the requested documents for the following reason.

 

I/ Basis of the ECB’s refusal to disclose the separate bond value of assets held under CSPP and PEPP

 

a. Regarding the Second indent of Article 4(1)(a) of Decision ECB/2004/3

 

The ECB's refusal relies on the Second indent of Article 4(1)(a) of Decision ECB/2004/3.

 

This Decision was taken at a time where environment was not one of the ECB’s concern. As such, it grants the ECB the possibility to refuse to disclose information when it “would undermine the protection of the public interest” but does not account for the fact that “the protection of the public interest” also entails the disclosure of detailed information on the climate impact of the ECB’s operations.

 

b. Regarding the effect of the disclosure on volatility and price discovery

 

The ECB refused the request arguing that "granting market participants access to detailed, disaggregated information regarding the CSPP/PEPP portfolios, could introduce undue volatility and distort price discovery in the market while compromising the effectiveness of the intervention measures and, potentially, their monetary policy objective".

 

I do not agree with the ECB for the following reasons:

1.      The ECB provides no credible evidence or data to justify that the disclosure of separate bond value would “introduce undue volatility” or “distort price discovery”.

2.      Market participants already have "detailed and disaggregated" information on the CSPP and PEEP portfolios as the list of corporate bond securities is already published and includes the ISIN of bonds. Yet, the ECB does not consider that this information "introduce undue volatility and distort price discovery".

3.      Whether information is published or not, the ECB's asset purchases already impact "price discovery" and asset prices.

 

Moreover, the ECB indicates “that the disclosure of detailed, disaggregated data on the securities purchased and held under the CSPP/PEPP (such as the separate bond value of CSPP and PEPP assets held by the Eurosystem) in a centralized and complete manner would lead market participants to draw inferences about the Eurosystem holdings and adjust their own behavior according to assumptions established on the basis of the information made available”.

 

However, the ECB already discloses the list of CSPP/PEPP corporate bonds in a “centralized and complete manner” and it is not clear that the additional disclosure of bond value would lead market participants to significantly modify their behavior. Furthermore, as the ECB explains in its response, the list of corporate bond securities under CSPP/PEPP is published on a weekly basis and not in real time. If the bond values were to be published at the same time, they would give little usable information to market participants.

 

Finally, when it comes to the climate impact of asset purchases, an alternative to the disclosure of separate bond value would be for the ECB to disclose aggregated information about the climate impact of its bond purchases. Namely, the ECB would need to start by disclosing the information mentioned in the request for access to document : https://www.asktheeu.org/en/request/disclosure_of_information_relate#incoming-26858 .

 

II/ The ECB’s commentary related to the climate impact of its purchases and the disclosure of climate related information

 

a. Regarding the “neutrality” of asset purchases

 

The ECB writes that “the implementation of the APP and PEPP are guided by the principle of market neutrality and does not positively or negatively discriminate on the basis of environmental or any other criteria. In the specific case of the CSPP and PEPP, the purchases of securities issued by non-bank corporations reflect proportionally the market value of all eligible bonds in terms of sectors of economic activity and rating groups.”

 

This is not true, as the ECB’s portfolio is mainly composed of carbon-intensive sectors and is more exposed to fossil fuels and less to low-carbon transports than the rest of the market.

 

Furthermore, market neutrality negates the political dimension of monetary creation and is totally anachronistic in the context of the climate emergency. Getting on track for the COP21 climate objectives requires institutions to redirect financial flows to support a 1.5°C trajectory. The notion of the transition itself implies both exiting unsustainable sectors and developing sustainable alternatives.

 

Yet, by trying to reproduce the market, the principle of market neutrality reinforces a polluting and fossil fuel-dependent economy. This principle is out of step with mechanisms that are currently developing to integrate climate risks, with the NGFS, the Task Force On Financial Disclosure (TCFD) at the European level, the Science Based Target Initiative (SBTI) internationally, or Article 173 of the energy transition law (LTECV) in France. Also, by allowing for carbon-intensive assets to accumulate on the ECB’s balance, it exposes the ECB to important and unaccounted financial risks and a breach of its fiduciary duty.

 

On the other hand, the ECB’s climate intervention is fully justified by European law as it fulfills its complementary mandates. It would contribute to the EU’s objectives, favor the emergence of sustainable growth, and respect the Paris Agreement. By intervening, the ECB would follow the EU’s key objectives and principles: It would protect Europe from future COVID-like disasters and their unprecedented economic and financial consequences.

 

b. Regarding the lack of “granular and forward-looking analyses of the carbon intensity” and the shortcomings of sectoral data

 

For the ECB, “meaningful assessment of the environmental impacts of the ECB asset purchases requires granular and forward-looking analyses of the carbon intensity of the investments financed by the bond issuances that benefitted from our asset purchases. This is currently not possible given the existing data gaps.”.

 

I note that the ECB clearly states that its asset purchases have an environmental impact. But, while building additional knowledge is useful and needed to achieve a complete “greening” of the financial system, concrete and rapid action is crucial and ample information is available to act right now.

 

As the ECB’s asset purchases reached historical proportions amid the COVID crisis, finance 38 fossil fuel companies – even in coal and shale oil and gas – and could end up supporting polluters to up to 220 billion, we do not have time to wait and the strategic review won’t produce any concrete results before 2022.

 

In fact, to keep global warming close to 1.5°C, we need progressively phase out fossil fuels to live in a fossil free world by 2050. More precisely, we need to phase out coal as soon as 2030 in Europe and the OECD and 2040 worldwide and oil and gas ten years later. These key objectives should immediately be used to assess the impact of the ECB’s operations and reduce it, thus aligning with European climate objectives. As GHG emissions are concentrated in a few most polluting sectors – including fossil fuels – these objectives would allow the ECB to swiftly improve its carbon footprint.

 

The ECB would probably respond that “sectoral data do not capture large differences within sectors and, most importantly, ignore any dynamics within firms over time. An example of such shortcomings is that issuance of green bonds is typically concentrated in sectors such as utilities, infrastructure, transportation and construction, which based on backward looking sectoral data, would be considered carbon intensive, despite them financing sustainable projects.”

 

But this is not a valid argument: the reduction of GHG emissions requires to simultaneously reduce polluting activities and scale up low-carbon alternatives, this depends on the global policy of the company and not on a single project. To ensure that its asset purchases are in line with the ecological transition, the ECB needs to buy bonds from companies that adopt plans to align on a 1.5°C trajectory. For fossil fuels, this means adopting the previously mentioned objectives.

 

c. Regarding PEPP’s crucial place in the ECB’s response to the Covid-19

 

The ECB emphasizes that “the successful implementation of the PEPP is critical for an effective monetary policy transmission mechanism aimed at delivering the favourable financial conditions that are necessary to support the economy, in view of the severe risks to the outlook for the euro area posed by the COVID-19 pandemic”.

 

I would like to stress that the lack of climate criteria in the PEPP is rising climate-related risks and, by refusing to fight against climate change and protect nature, contributing to future Covid-like crisis. As many European leaders and financial players have stated, the response to Covid needs to be “green”. Monetary policy should not be exempted from this green imperative. Ending the support that PEPP provides to the most polluting companies is a logical and necessary step.

 

A full history of my request and all correspondence is available on the Internet at this address: https://www.asktheeu.org/en/request/disclosure_of_separate_bond_valu

 

Yours faithfully,

 

Paul Schreiber

Reclaim Finance

 

 

 

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