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ECB to accept sustainability-linked bonds as collateral

Posted on: 25 September 2020

The European Central Bank (ECB) has announced that it will be accepting sustainability-linked bonds as collateral from 1 January 2021, see here for more details.

ECB 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 coupons must be linked to a performance target referring to one or more of the environmental objectives set out in the EU Taxonomy Regulation and/or to one or more of the United Nations Sustainable Development Goals relating to climate change or environmental degradation. This further broadens the universe of Eurosystem-eligible marketable assets and signals the Eurosystem’s support for innovation in the area of sustainable finance.

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.

In reaction to ECB’s latest announcement Harry Theochari, Global Head of Transport at Norton Rose Fulbright LLP, who is also Vice-Chairman of Maritime London and Chair of umbrella body Maritime UK, commented: “The maritime industry heralded its first steps towards a sustainable future with the establishment of the Poseidon Principles. This set a framework for assessing and disclosing the climate alignment of ship finance portfolios.

“Various developments have continued in the sustainable finance world including green bonds, sustainable bonds, and now sustainability-linked bonds – all of which are tools within our arsenal to achieve greater climate alignment in shipping finance.”

North Rose Fulbright LLP, a global law firm specialising in finance, energy, property, high-end insurance and transport practices, explains what sustainability-linked bonds are and how they work in this article.

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Maritime London – the promotional body for UK based companies providing professional services to the international shipping industry

Funded by over 100 companies and organisations from a wide range of disciplines, Maritime London ensures that the UK remains a world beating location to base a maritime related business. Maritime London’s mission is to promote the UK as the world’s premier maritime business centre.

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The UK is home to a world beating array of professional maritime service providers. Maritime sectors include:

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