The European Central Bank (ECB) is making significant progress toward its emission reduction goals by increasing its investments in green bonds and incorporating climate considerations into its financial policies. According to the ECB’s latest disclosures, the share of green bonds in its own funds portfolio rose from 28% in 2024 to 33% at the end of 2025, representing €7.6 billion dedicated to supporting the green transition. The ECB plans to raise this share further to 35% in 2026.
This positive development is partly driven by a natural decline in emissions from maturing securities that are not replaced, a process known as run-off, which led to a 13% reduction in emissions associated with the Eurosystem’s monetary policy portfolios and the ECB’s foreign reserves in 2025. The Eurosystem includes the ECB itself and the national central banks of eurozone countries.
ECB President Christine Lagarde emphasized the institution’s commitment to tackling climate change risks. She highlighted that climate change and environmental degradation pose physical and transition risks to the ECB’s balance sheet. To manage these risks better, the ECB has introduced a climate factor into its collateral framework, a move aimed at reducing financial risks linked to climate change. Lagarde noted that similar steps are being taken by other central banks, such as the Bank of England.
The ECB’s report also introduced new inflation-adjusted emissions metrics for the first time, enhancing transparency by accounting for inflation’s impact on emission figures. Furthermore, it disclosed relative metrics for scope 3 emissions—those indirect emissions occurring throughout a company’s value chain—for non-sovereign holdings for the first time. The report also included data on nature-related risks within its portfolios for a second consecutive year, reflecting growing recognition of the connection between nature loss and economic stability.
Lagarde stressed that water-related stress and other environmental challenges can have cascading effects on ecosystems and economies, with serious consequences for price stability and banking portfolios. These insights underline the importance of integrating environmental factors into financial decision-making processes.
In addition to environmental initiatives, President Lagarde addressed emerging technological risks during a recent speech in Venice. She warned that artificial intelligence (AI) poses significant risks to financial stability if not properly managed. While acknowledging that AI cannot be stopped due to its rapid advancement, Lagarde affirmed that the ECB is preparing measures to protect citizens from potential dangers while enabling them to benefit from AI innovations.
This dual focus on environmental sustainability and technological risk management reflects the ECB’s broader strategy to safeguard economic stability amid evolving global challenges. By advancing green investments and developing frameworks to address new financial threats like AI, the ECB aims to promote a resilient and sustainable financial system for Europe.
