The E-axes Forum on Climate Change, Macroeconomics, and Finance

Katie Kedward (UCL), Melina Papoutsi (ECB)

“Climate and biodiversity in ECB corporate purchases”

Event description

The report on “Quantitative easing and nature loss” by Katie Kedward et al. 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.

The working paper “How unconventional is green monetary policy?” by Melina Papoutsi et al. studies the environmental impact of unconventional monetary policy. Our theoretical framework is a multisector growth model with climate externalities and financial frictions. When central bank asset purchases have real effects on aggregate output, their sectoral composition typically affects the climate. Market neutrality of asset purchases does not follow from simple formulas used by policy makers, but depends on (i) the impact of central bank purchases on firms’ cost of capital and (ii) the share of capital funded by bonds. We use micro data on bond holdings, firm characteristics and emissions to show that the ECB’s corporate bond portfolio is tilted towards brown sectors relative to a market portfolio of sectoral capital stocks.


Pierre Monnin
Senior Fellow, CEP

Katie Kedward

Policy Fellow in Sustainable Finance at the Institute for Innovation and Public Purpose
Katie Kedward is an economist and Policy Fellow in Sustainable Finance at the Institute for Innovation and Public Purpose, University College London. Her research interests span Post-Keynesian and Ecological Economics approaches, focusing especially on money, banking, and the intersection between finance and the environment. Katie started her career in capital markets at the Royal Bank of Canada, as a government bond and derivative specialist. Prior to joining UCL, she worked in green banking at ShareAction, the responsible investment NGO, and as a researcher for George Monbiot, focusing on sustainable food systems. Katie holds an MSc degree in ecological economics from the University of Leeds and a First-Class degree from the University of Cambridge. She has contributed to publications such as LSE Business Review, Open Democracy, and Brave New Europe. Katie sits on the advisory panel for Positive Money UK, an NGO campaigning for a fair, democratic, and sustainable financial system.

Melina Papoutsi

Senior Economist, Financial Research Division
Melina Papoutsi is a Senior Economist in the Financial Research Division of the European Central Bank. Her primary research interests include the areas of financial intermediation, monetary policy, and corporate finance. In her research, she has focused on topics such as the European bond market, the interaction between monetary policy and financial markets, and banking relationships. Her research has been presented at leading academic conferences, such as the annual meeting of American Economic Association, the summer institute of National Bureau of Economic Research (NBER), and conferences organized by Centre for Economic Policy Research (CEPR). Melina received a PhD in Finance and Economics from Columbia Business School in 2018 and holds a Master’s degree in International and Development Economics from Yale University.

Paper and slides

Link to both papers

Link to slides



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