ECB climate factor 2026: New risk discount changes refinancing operations

Focus on climate risks: New ECB climate factor changes refinancing operations

The European Central Bank announced the introduction of a climate factor for refinancing transactions at the end of July 2025. From the second half of 2026, climate-related transition risks will be taken into account in the ECB’s collateral framework. Corporate bonds and other marketable assets may lose value in the course of the transformation to a lower-carbon economy, especially if issuers are heavily dependent on fossil fuel business models. In future, the climate factor will act as an additional risk discount on collateral and thus protect the ECB from potential losses in value. Commercial banks and other institutions that regularly use ECB refinancing operations and deposit corporate bonds or similar assets as collateral are particularly affected. This is particularly critical for collateral pools that are heavily influenced by energy-intensive or high-emission sectors. The requirements will come into effect in the second half of 2026; until then, banks can prepare their data quality, systems and internal valuation models for the new requirements.

Composition of the climate factor

The ECB’s climate factor is designed in such a way that it reflects the climate-related transition risks of collateral in a differentiated manner and adjusts the risk discounts to the respective exposure in future. The calculation is based on three main components: The sectoral risk, which is assessed on the basis of the results of the Eurosystem’s climate stress test so that, for example, collateral from emissions-intensive sectors receives greater haircuts. The individual risk of the issuer based on the climate score. The remaining term of the corporate bonds or assets The specific weighting of the individual factors is not yet known.

Primary and secondary effects are also reflected in the income statement

Primarily, new collateral management requirements arise for banks. They must systematically record and assess the climate risks of their collateral and take them into account when managing ECB-eligible assets. Assets with a high climate risk will be subject to higher discounts in future, which will reduce the lending values and less central bank liquidity can be mobilized. This results in a direct incentive to allocate the composition of collateral pools according to climate aspects in addition to risk/reward aspects. Secondarily, the climate factor can also have a corresponding impact on the institutions’ income statements. The reduction in lending values can reduce the market attractiveness of assets, leading to valuation losses. Refinancing costs can also increase if more expensive alternative sources of financing have to be used due to the reduced ability to lend. Costs and expenses for internal resources, e.g. for data preparation and portfolio optimization, also increase.

Early measures stabilize the refinancing situation

In the remaining preparation time, banks should analyse their collateral pools in detail according to climate risks and establish a classification by issuer, sector and remaining term at an early stage and derive corresponding effects. Diversification towards lower-emission and more climate-friendly assets reduces future discounts and secures the liquidity position for ECB refinancing transactions. In addition, close coordination between treasury, risk management and sustainability teams is required in order to efficiently implement valuation and reporting requirements.

Institutions that align their collateral pools with climate aspects benefit from lower value adjustments and can keep their financing costs stable. In the long term, early adjustment also makes it possible to avoid losses due to potentially stranded assets.