Central Banks Double Down on Climate Regulation Despite Collapse of Green Finance

The Bank of England and ECB ratchet up the weaponisation of green policy

Last weekend, as wildfires continued to scorch parts of southern Europe, Frank Elderson of the European Central Bank’s Executive Board took to the pages of the Guardian to warn that the “climate and nature crises” now pose a direct threat to “core financial stability” and even “core price stability”. The destruction of ecosystem services, he insisted, is not some “flower-power, tree-hugging exercise” but “core economics”. The ECB, he added, is already deepening its scrutiny of banks’ exposures to nature-related risks, with further analysis due later this year.

This is the same institution that, only 10 days earlier, quietly expanded its “climate factor” in the “Eurosystem collateral framework” to cover non-financial corporate loans. From the end of 2027 at the earliest, loans to companies deemed exposed to “transition shocks” from climate change will face an additional haircut of up to 5%. The July decision and Elderson’s August rhetoric are of a piece: the ECB continues to weaponise climate (and now nature) policy even as the empirical, political and market ground shifts decisively under the alarmist camp.

From wildfires to collateral haircuts

As Green Central Banking reported, the climate factor — already applied to non-financial corporate bonds since mid-2025 — will now extend to credit claims in a major expansion of its punitive scope.

The ECB frames this as mere risk management against shocks from policy changes, technology, consumer behaviour, litigation or macroeconomic adjustment. In reality it is green industrial policy by another name: systematically raising the cost of capital for higher-carbon activities under the guise of protecting the central bank’s balance sheet.