In the first case of its kind, the NGO ClientEarth has brought proceedings against the Belgian National Bank (BNB) on the basis that the bank has breached environmental and human rights laws when implementing the Corporate Sector Purchase Programme set up by the European Central Bank (ECB) and purchasing assets under it.  ClientEarth alleges that the BNB’s purchases are effectively directing capital into sectors which fuel the climate crisis.  It asks the Belgian courts to refer the question of whether the ECB’s decision to establish the purchase programme in 2016 was valid to the European Court of Justice, and to make orders halting the BNB from making purchases under the programme. 

What is the underlying basis for the claim?

ClientEarth’s case is that the purchase programme is biased towards greenhouse gas-intensive companies, as studies have shown that over half of the assets purchased under it have been issued by greenhouse gas-intensive sectors.  It says that the ECB and the BNB owe legal obligations to maintain price stability, support the economic policies of the EU and contribute to the achievement of the EU’s objectives, take into account environmental protection requirements when setting monetary policy, and respect and observe the principles in the EU Charter of Fundamental Rights, and that the ECB’s decision to establish the purchase programme was in breach of all of these obligations and therefore invalid.  It also says that the ECB must mitigate climate-related financial risks in its balance sheet through its corporate asset purchases, and that in establishing the purchase programme it has failed to do so.

Strategic timing

ClientEarth has brought its case as the ECB is reviewing its Monetary Policy Strategy – and it has written to the ECB in parallel to ask it to use the review as an opportunity to reform the purchase programme.  ClientEarth’s letter asks the ECB to align the purchase programme with the Paris Agreement goals by:

  • Excluding companies whose activities are clearly incompatible with achieving the Paris Agreement goals or are associated with high transition risk;
  • Stopping or restricting purchases of bonds from carbon-intensive companies if they do not adopt a credible Paris-aligned strategy to achieve net zero emissions by January 2023; and
  • Setting a comprehensive strategy on how the ECB itself will align its monetary policy portfolios and activities with the Paris goals, including issuing an annual report disclosing its progress in line with the recommendations of the Task Force for Climate-related Financial Disclosures (TCFD).

Next steps

This is the first case brought worldwide against a central bank in relation to alleged climate failings.  Other climate-related cases in the financial sector have to date focused on the question of whether climate risk has been properly considered in decisions and disclosed to investors, but this is the first case in which a claimant is demanding such an ambitious and sweeping change in policy, and which tackles the very complex question of how the financial sector should approach the transition to a low-carbon economy.  Financial services firms will be interested in the way that this case progresses through the courts, given the sophistication of the challenge and its potential impact on the financial markets if the ECB restricts its asset purchases to certain sectors or to companies which meet specified criteria.