Following a similar approach, last July the European central bank announced a gradual decarbonization of its corporate bond portfolios, as part of a broader set of measures aimed at mitigating climate-related financial risks on the Eurosystem balance sheet and incentivizing issuers to improve disclosure and reduce future carbon emissions.2 In parallel, the Single supervisory mechanism is encouraging banks to adopt transition plans consistent with the Paris Agreement and to pressure the companies they finance to meet their transition objectives, up to the last resort of curtailing credit.3  1  This discussion builds on some of my remarks in “The financial risks posed by climate change: information gaps and transition plans”, Associazione nazionale per lo studio dei problemi del credito, Milan, 15 November 2022.
2  See “ECB takes further steps to incorporate climate change into its monetary policy operations”, 4 July 2022. 3  Elderson (2022), “Banks need to be climate change proof”, The ECB Blog. The topic of transition plans is relatively new.