Quantitative Easing and Nature Loss: Exploring Nature-Related Financial Risks and Impacts in the European Central Bank's Corporate Bond Portfolio

50 Pages Posted: 16 Sep 2021

See all articles by Katie Kedward

Katie Kedward

UCL Institute for Innovation and Public Purpose

Josh Ryan-Collins

UCL Institute for Innovation and Public Purpose

Adrienne Buller

affiliation not provided to SSRN

Date Written: September 13, 2021

Abstract

This report explores the interactions between nature-related financial risks and monetary policy, focusing on the ECB’s corporate asset purchase operations (also described as corporate ‘quantitative easing’ or ‘QE’). Using the ENCORE framework, we find that the sectors the ECB is invested in are associated with significantly high dependencies upon nature to facilitate production, as well as contributing to significantly negative impacts upon nature which threaten the future provision of vital ecosystem services. As a major central bank and holder of 20% of euro-denominated corporate bonds, the ECB’s approach to managing nature-related risks within its portfolio will have considerable signalling power to financial markets and could have a material impact on the uptake of prudent risk management practices relating to nature.

Keywords: monetary policy, biodiversity, nature, finance risk, financial stability, central banks, european central bank

Suggested Citation

Kedward, Katie and Ryan-Collins, Josh and Buller, Adrienne, Quantitative Easing and Nature Loss: Exploring Nature-Related Financial Risks and Impacts in the European Central Bank's Corporate Bond Portfolio (September 13, 2021). Available at SSRN: https://ssrn.com/abstract=3922913 or http://dx.doi.org/10.2139/ssrn.3922913

Katie Kedward (Contact Author)

UCL Institute for Innovation and Public Purpose ( email )

11
Montague Street
London, WC1B 5BP
United Kingdom

Josh Ryan-Collins

UCL Institute for Innovation and Public Purpose ( email )

11
Montague Street
London, WC1B 5BP
United Kingdom

HOME PAGE: http://https://www.ucl.ac.uk/bartlett/public-purpose/

Adrienne Buller

affiliation not provided to SSRN

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