European Central Bank to Allow Sustainability-Linked Bonds as Collateral

Posted on 09/29/2020

The European Central Bank (ECB) disclosed on September 22, 2020, that bonds with coupons linked to sustainability performance targets to become eligible as central bank collateral. The central bank has decided that bonds with coupon structures linked to certain sustainability performance targets will become eligible as collateral for Eurosystem credit operations and also for Eurosystem outright purchases for monetary policy purposes, provided they comply with all other eligibility criteria.

The decision applies from January 1, 2021.

There is potential eligibility also for asset purchases under the APP and the PEPP subject to compliance with programme-specific eligibility criteria. Furthermore, non-marketable assets with comparable coupon structures are already eligible. The decision aligns the treatment of marketable and non-marketable collateral assets with such coupon structures.

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