Impact of Green Central Bank Collateral Policy: Evidence from the People’s Bank of China

Macaire, Camille; Naef, Alain

doi:10.31235/osf.io/cmwpn

Cited by 10 publications

(7 citation statements)

References 8 publications

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“…In our assessment of extending collateral eligibility criteria to green assets, we find, as empirical evidence confirms (see e.g. Macaire and Naef, 2021), that this would reduce the yield of those assets. However, the interaction of extended collateral eligibility criteria and QE is inconclusive.…”

Section: Introductionsupporting

confidence: 75%

“…While data confirms that extending collateral eligibility will lower the corresponding assets' yield (see e.g. Corradin and Rodriguez-Moreno, 2016;Macaire and Naef, 2021), it is unclear how such a policy would interact with central bank asset purchases. In the representative agent model in Section 3 a reduction in the business model factor of the assets purchased by the central bank will reduce the impact of QE for b > 1.…”

Section: Collateral Elibibilitymentioning

confidence: 99%

“…While Schoenmaker (2021) shows how to effectively tilt the ECB asset and collateral framework towards green assets, little is known about the impact this would have on bond yields and the greenium. We are aware of only two papers that attempt such an assessment: Macaire and Naef (2021) empirically estimate that the extension of collateral eligibility criteria by the People's Bank of China to include green bonds increased the greenium by 46 basis points. 3 Ferrari and Nispi Landi (2021) show within a calibrated DSGE model in which green and brown bonds are imperfect substitutes that a temporary increase in green asset holdings increases the greenium and mitigates detrimental emissions.…”

Section: Introductionmentioning

confidence: 99%

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Scaling, Unwinding and Greening QE in a Calibrated Portfolio Balance Model

Koziol

Riedler

2021

SSRN Journal

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We develop a portfolio balance model to analyze the impact of euro area quantitative easing (QE) on asset yields. Our model features two countries each populated by two agents representing their respective banking and mututal fund sectors. Agents, which differ in their preferences for assets, can trade currencies, bonds and equities. In simulations of the calibrated model we find that 10-year euro area bond returns decline by 31 basis points in response to 1 trillion in central bank bond purchases, which is in line with the empirical literature. QE leads to a substantial flattening of the yield curve and increasing the maturity of purchased bonds increases the average yield impact. When QE is unwound, yields increase quicker than the central bank balance sheet shrinks. This is because the yield impact scales non-linearly with increasing asset purchases. When assessing the potential impact of green QE, we find that it is slightly less effective in reducing bond yields than conventional QE. However, the spread between green and brown bond yields decreases with conventional QE while it increases with green QE. JEL classification: C63 -G11 -E52Keywords: euro area QE -portfolio balancing channel -yield curve -green QE * Computations were performed using facilities provided by the University of Cape Town's ICTS High Performance Computing team (hpc.uct.ac.za).

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Section: Introductionsupporting

confidence: 75%

Section: Collateral Elibibilitymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Scaling, Unwinding and Greening QE in a Calibrated Portfolio Balance Model

Koziol

Riedler

2021

SSRN Journal

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“…In China, one of the emerging countries with fast-developing climate finance architecture, the People's Bank of China (PBoC) decided to include green financial bonds into the pool of assets 14 eligible as collateral for its Medium-Term Lending Facility. The reform increased the greenium, i.e., the spread between green and non-green bonds, by 46 basis points (Macaire and Naef 2021).…”

Section: Green Monetary Policies (Gmp)mentioning

confidence: 99%

The Role of Green Financial Sector Initiatives in the Low-Carbon Transition: A Theory of Change

Monasterolo¹,

Mandel²,

Battiston³

et al. 2022

Policy Research Working Papers

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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“…The author claims that Article 11 of the TFEU integrates environmental objectives into the mandate of the Eurosystem, and requires that those objectives be taken into account when designing and implementing monetary policy. The author concludes that, other than a distinctive source of legal obligations, Article 11 of the TFEU represents an opportunity for the Eurosystem to contribute to improving the understanding of the relationship between climate change and financial stability Macaire and Naef (2021). carry out one of the first empirical analyses on the effect of central banks' green policies on the yield spread between green and nongreen bonds.…”

mentioning

confidence: 99%

Introducing Principles and Standards for Responsible Investment

Danilov

2023

WEIR

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The article provides information on the latest developments in the field of building sustainable finance standards as an integral element of the sustainable development model. The rapid growth of responsible investment naturally created a demand for the formation of principles and standards both for responsible investors themselves and for corporations wishing to attract responsible investments. The development of standards, norms and rules that ensure the effectiveness of responsible investments is carried out in close cooperation with international financial organizations, associations of market participants and regulators. The article presents a general picture of this process, including information about its main participants, their most important decisions and achievements in the field of implementing the concept of sustainable finance. It is divided into 4 blocks. The first block talks about the rules and regulations for responsible investment, including the requirements developed by such investors in relation to themselves. The second block briefly describes the process of standardizing the disclosure of non-financial information and the problems of ensuring its reliability. The standards for disclosure and confirmation of the reliability of information about the adherence of corporations to the principles of sustainable development create the basis for the formation of long-term trust, which is a prerequisite for the functioning of the sustainable development model. The third block briefly describes the styles of responsible investing and the trends in their application. The fourth block is devoted to proposals and projects for central banks to change their monetary policy in order to stimulate responsible investment. The article is aimed at the widest range of readers interested in the problems of responsible investment, focusing on the most important documents in this area developed abroad in recent years.

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Impact of Green Central Bank Collateral Policy: Evidence from the People’s Bank of China

Cited by 10 publications

References 8 publications

Scaling, Unwinding and Greening QE in a Calibrated Portfolio Balance Model

Scaling, Unwinding and Greening QE in a Calibrated Portfolio Balance Model

The Role of Green Financial Sector Initiatives in the Low-Carbon Transition: A Theory of Change

Introducing Principles and Standards for Responsible Investment

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