Climate change and its consequences have far-reaching implications for the economic and financial system. They can have an impact on price stability, the growth outlook and the stability of the banking and financial system. Consequently, they affect a central bank’s core tasks. The Bundesbank therefore considers climate-related risks within the scope of its mandate. Nature and biodiversity loss can also have negative impacts 1 and thus increasingly falls within the scope of the Bundesbank’s studies and analyses.
Section 2 on governance outlines how the Bundesbank has built up its internal resources, Bank-wide governance and cross-sectional information sharing in this area in recent years. The Executive Board coordinates topics and projects centrally via the Green Finance Steering Committee (LAGFin). This committee receives subject matter input from the Green Finance Expert Group and organisational support from the Sustainability Hub.
Section 3 on strategy presents the climate-related focal topics of the various business units at the Bundesbank, as well as the national and international committee work for a more sustainable economic and financial system, as in the Network for Greening the Financial System (NGFS). The environmental, social and governance (ESG) Bond Monitor provides an insight into the Bundesbank’s market analyses. This section also explains the Bundesbank’s sustainability-related tasks in its role as fiscal agent for Germany’s central and state governments. In addition, it outlines the sustainability strategies for the Bundesbank’s own non-monetary policy financial investments. 2
Section 4 on risk management gives an overview of the monitoring, measurement, analysis, internal communication and management of risks to the Bundesbank arising from climate change and the transition to a net zero economy.
Section 5 on metrics discloses greenhouse gas (GHG) and other sustainability metrics. These metrics focus on the Bundesbank’s euro portfolio and foreign currency reserves. For the first time, the report also presents metrics on the Bundesbank’s shares in the Eurosystem’s monetary policy holdings of corporate and covered bonds. When looking at the individual portfolios, bear in mind that they are subject to different parameters and should each be considered in their own specific contexts. The main findings concerning climate and sustainability-related metrics are presented below.
As at the end of 2024, the euro portfolio contained only covered bonds issued by banks. This means that those banks’ GHG emissions are relevant to the GHG metrics of the euro portfolio. With the exception of the provisional GHG metrics 3 for 2024, a persistent downward trend can be seen here. This applies, amongst other things, to the weighted average carbon intensity (WACI), which reflects the portfolio’s GHG intensity, and to the carbon footprint, which expresses GHG emissions financed by the portfolio relative to the portfolio’s volume (see Figure 1). The main reason for these declines is likely to be that banks are increasingly sourcing electricity from renewable sources and, as a result, reducing their scope 2 emissions. However, the available GHG metrics only have limited informative value, as they consist solely of scope 1 and 2 emissions which are those stemming from banks’ operational activities. 4 The GHG emissions financed by banks (part of scope 3) are of greater relevance. The data on these emissions are still insufficient, but the situation is likely to improve further in the medium term.
The Bundesbank’s reserve assets comprise gold holdings, receivables from the International Monetary Fund (IMF) and foreign currency reserves. The latter include bonds issued by national and supranational promotional and development banks as well as sovereign bonds. This report contains climate-related metrics for the gold holdings (see Section 5.2.3 The Bundesbank's gold holdings) and the foreign currency reserves (see Section 5.2.1 Bonds issued by promotional and development banks and Section 5.2.2 Sovereign investments).
The financing activities of promotional and development banks, whose bonds are held in the foreign currency reserves, continue to have a high “green” (beneficial to the environment) share in 2024, at 18.7 %. Business activities classed as green primarily comprise the financing of renewable energy, energy efficiency measures and public transport infrastructure.
The WACI of investments in sovereigns is lower if the sector of land use, land use change and forestry (LULUCF) is included. This sector has captured greater quantities of GHG than it has emitted in the case of the sovereigns represented in the foreign currency reserves. Both including and excluding LULUCF, the WACI has declined almost continuously since 2015 (see Figure 2). In 2024, the addition of pound sterling to the foreign currency reserves, mostly invested in UK bonds, contributed to a minor decrease in the WACI. However, it should be borne in mind that the WACI relative to gross domestic product (GDP) is depicted adjusted for purchasing power parity (PPP). The latter’s inflation-driven increase is thus a factor in the WACI decline. After adjusting for inflation, the reduction in the WACI is just under half as large (see Section 5.2.2.1 GHG metrics).
This year’s report is the first time the Bundesbank is publishing GHG metrics for the Eurosystem’s monetary policy holdings of corporate and covered bonds. These were calculated for the Eurosystem by the European Central Bank (ECB) using a standard methodology and provided to the national central banks. They show a recent decline in the WACI and the carbon footprint for scopes 1 and 2, in particular (see Figure 3).
Section 6 on targets and outlook describes the Bundesbank’s efforts going forward to consider climate-related and sustainability-related aspects in its internal and external strategy, committee and communication work. This includes its commitment to improving the availability and quality of sustainability data in the financial system as well as to further refining its own analytical and investment strategies.
