The climate transition will directly affect the value the European Central Bank assigns to some of the collateral submitted by banks. The Governing Council has decided to include certain eligible credit claims against non-financial corporations in the Eurosystem’s climate factor framework. According to the only available source, the ECB’s statement of July 24, 2026, the aim is to protect the Eurosystem’s balance sheet against financial uncertainty arising from the transformation of the economy.

The mechanism applies to operations in which counterparties obtain Eurosystem funding by pledging assets as collateral. These assets are not necessarily recognized at their full value: the central bank applies valuation reductions to absorb the risk of potential losses. Under the new decision, sensitivity to the climate transition may lead to an additional reduction for certain loans granted to companies.

The key figure is a 5% cap. The ECB said this will be the maximum additional reduction applied to the final value of collateral, covering both bonds and the credit claims concerned. The treatment will follow a risk-based scale: the greater the exposure to climate-related uncertainty, the lower the value assigned to the asset pledged as collateral.

The adjustment does not apply broadly to every environmental risk. The ECB specifically refers to transition shocks, meaning unexpected developments that may accompany the shift toward a lower-emission economy. Examples include changes in climate policies, technological developments, new consumer preferences, litigation and wider macroeconomic adjustments.

These developments may affect companies’ repayment capacity or the value of assets received as collateral. In the ECB’s assessment, the problem becomes particularly relevant if the Eurosystem must liquidate the collateral: a regulatory, technological or commercial shock could reduce its price precisely when the asset is needed to cover the exposure. The climate factor is intended to account for this possibility in advance.

An uncertainty score will be calculated for each individual asset to measure the risk. It will include three elements: a sectoral stress factor derived from the Eurosystem’s latest climate stress test, the borrower’s exposure to transition uncertainty and the credit claim’s remaining maturity. The valuation reduction will therefore depend on the combination of the economic sector, the company’s risk profile and the time remaining until maturity.

The quality of the information will be crucial. The ECB states that when data for the industry or individual borrower are unavailable, the Eurosystem may use sector-level information or alternative data considered suitable for the assessment. The statement does not specify which substitute sources will be accepted, how they will be selected or how much valuations may differ when less detailed information is used.

The decision extends to credit claims an approach already adopted for the bond market. In July 2025, a climate factor was approved for marketable assets issued by non-financial corporations and their affiliated entities. That system became operational on June 15, 2026. The new measure applies the same principle to some of the non-marketable credit claims accepted by the Eurosystem.

Transparency will nevertheless have a clear limit: the climate factors assigned to individual credit claims will not be disclosed. The ECB has instead announced that values will be updated annually through the same process already used for bonds issued by non-financial corporations. These reviews will incorporate the latest available climate data and may change collateral valuations over time.

Implementation is expected no earlier than the end of 2027, but no definitive deadline has been set. The operational timetable, the precise scope of eligible credit claims and the use of alternative data still need to be determined. These details, together with the coefficients that will remain confidential, will establish how significantly the new criterion affects the value of collateral pledged by Eurosystem counterparties.