Research
Can Unconventional Monetary Policy Contribute to Climate Action?
Joint work with Andrea Giulio Maino, SFI@UNIGE
Abstract: We examine whether central banks can redirect financial flows toward green finance, and to what extent it prompts a cut in firms’ carbon emissions. We focus on the European Central Bank’s July 2021 Monetary Policy Strategy Review, which unexpectedly dedicated an entire workstream to climate change. We find that this announcement had a significant effect on green bonds: (i) ECB-eligible green bonds’ Yield-to- Maturity decreased compared to equivalent conventional bonds; (ii) firms incorporated in the Eurozone reacted by increasing the amount of green bonds issued, particularly in the investment-grade segment. In contrast, we obtain that the increase in green bond issuance was not matched by an increase in firms’ efforts to reduce emissions in the long term, as signaled by the signature of net-zero commitments.