The President of the European Central Bank (ECB), Christine Lagarde, has issued a letter responding to Members of the European Parliament regarding the Eurosystem's evolving approach to climate-related financial risks. Firstly, the letter confirms the ECB's plan to introduce a "climate factor" in the second half of 2026, which will adjust the collateral value of marketable assets from non-financial corporations based on climate risk data. This replaces previously proposed collateral pool concentration limits, which were not implemented due to insufficient data granularity. The climate factor is part of the ECB's broader Climate and Nature Plan, aimed at strengthening climate risk management across the Eurosystem's balance sheet and collateral framework. Secondly, the letter emphasises the importance of high-quality climate data and raises concerns about the Omnibus I sustainability package, which proposes amendments to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive that would reduce reporting obligations. As highlighted in the ECB opinion dated 8 May on the Omnibus proposal, it is their view that the proposed changes risk reducing firm-level sustainability reporting, weakening the Eurosystem's ability to assess climate-related financial risks, and causing delays in the transposition of the CSRD into the national laws of euro area member states. The letter therefore concludes by stressing the need to "strike the right balance" between preserving the benefits of sustainability reporting and ensuring proportionality in the requirements.
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