Traditional money market funds seek to maintain a constant NAV (CNAV funds) ie they invest with the explicit goal of maintaining a stable NAV of $ per share. Investors like this because it avoids any market price fluctuations in their investments. A CNAV money market fund is said to “break the buck” when its NAV falls below $ per share (or the equivalent in a fund’s respective currency). This is a rare event. Prior to the crisis, it had not happened to a US money market fund since the Community Bankers US Government Fund broke the buck in 199413. The conventional perception was that the principal should be “safe”. When money funds came under pressure during the crisis, more than 60 asset managers (among others, Wachovia and Legg Mason) unilaterally made up more than $ billion of losses14. On 16 September 2008, the Prime Reserve Fund, the oldest U.S. money market fund, wrote off 3 cents of losses on Lehman Brothers. Not being able to make up the losses, the fund was left with a NAV of $ triggering a “run” in the money markets. On 19 September 2008, the U.S. Treasury announced the establishment of a temporary one-year guarantee program to protect investors in money market funds. The funds that were eligible had to pay a fee to participate in the program, and any fund that had already “broke the buck” could not participate. This example raises several interesting issues.
But a more contentious debate has emerged over the potential use of our asset purchases to pursue climate-related goals. Our corporate sector purchase programme in particular has come in for criticism as it includes emission-intensive sectors, such as manufacturing and utilities.30 In this debate, it is important to recall that the ECB decides on and calibrates its monetary policy measures with a view to achieving its price stability objective under the Treaty. As a consequence, more than 80% of the € trillion of securities purchased under our Asset Purchase Programme were issued by governments or their agencies. The remaining share consists of purchases of covered bonds, corporate bonds and assetbacked securities. For these assets, the Governing Council concluded that the best way to achieve its monetary policy objective was to follow the principle of market neutrality.31 This principle does not preclude supporting environmental objectives, however. 32 The ECB has purchased “green bonds” both under its public sector and corporate sector purchase programmes. Under the former, we currently hold around 24% of the eligible “green” universe, estimated to amount to some € billion. Under the latter, we hold close to 20% of the eligible “green” corporate bond universe, which currently has an outstanding volume of € billion euros. Under both programmes, the share we hold in “green” eligible bonds mirrors, by and large, the share of our holdings of the entire eligible universe.