More than half of corporate bond purchases by the Bank of England and European Central Bank (ECB) back carbon-intensive sectors, and may give them a disproportionate advantage over low-carbon sectors, according to a new study published today (30 May) by the Grantham Research Institute on Climate Change and the Environment and the ESRC Centre for Climate Change Economics and Policy at the London School of Economics and Political Science.

The analysis by Sini Matikainen, Emanuele Campiglio and Dimitri Zenghelis concludes that although the purchases, made under the central banks’ quantitative easing programmes to boost economic growth, are intended to be sector-neutral, they inadvertently favour carbon-intensive manufacturing and utilities.

The report, The climate impact of quantitative easing, points out that 62.1 per cent of the ECB’s corporate bond purchases, worth €82 billion up to April 2017, have been in manufacturing and utilities sectors though they make up only 18 per cent of the Eurozone area economy. These sectors produce 58.5 per cent of greenhouse gas emissions in the Eurozone.

Similarly, in the UK, the same sectors make up 11.8 percent of the economy but represent 49.2 per cent of the corporate bonds that meet the Bank of England’s benchmark as purchasable under their £10 billion quantitative easing programme. They produce 52 per cent of greenhouse gas emissions in the UK.

The analysis also reveals that renewable energy companies are not represented at all in ECB or Bank of England purchases, while oil and gas companies make up an estimated 8.4 per cent and 1.8 per cent of the banks’ corporate bond purchases respectively.

The study points out that that the disproportionate purchases in high-carbon sectors “partly reflects” the makeup of the European corporate bond market and financial markets which currently do not fully price in the risks inherent in high-carbon investments. The report warns that this skew of these purchases “raises concerns”.

It warns that the central banks may be “unintentionally reinforcing the status quo, in which low-carbon investments suffer from a ‘green investment gap’ relative to the socially optimal scenario consistent with limiting warming to 1.5–2°C above pre-industrial levels.”

The report adds:  “There is evidence of a disproportionate jump in the price of eligible assets after the introduction of these corporate bond purchase programmes”. This could encourage more debt issuance by corporations in high-carbon sectors relative to low-carbon sectors by reducing their relative cost of capital and may be “exacerbating existing mispricing” around high-carbon sectors.

The report calls for the central banks to increase transparency around their asset purchases and around the eligibility criteria governing which purchases they make under programmes designed to stimulate growth across the economy after the 2008 financial crash.

It also recommends that the central banks could “consider options for changing their purchasing strategy.”

The report states that the skew towards high-carbon sectors is in “direct contradiction with” and may “undermine” the signals that financial regulators are making about the risks associated with high-carbon investments.

It calls on the central banks to “investigate the impact of their interventions on both high-carbon and low-carbon investment” and work with fiscal policy-makers and financial regulators to “harmonise the overall policy effort aimed at achieving a rapid and smooth transition to a low-carbon economy”

The report concludes: “While monetary policy cannot be a substitute for environmental policy, monetary policy-makers should be mindful of the impacts on asset pricing, including risks to market efficiency and financial stability.”

For more information about this media release please contact Victoria Druce on +44 (0) 207 107 5865 or or Bob Ward on +44 (0) 7811 320346 or



  1. The ESRC Centre for Climate Change Economics and Policy ( is hosted by the University of Leeds and the London School of Economics and Political Science. It is funded by the UK Economic and Social Research Council ( The Centre’s mission is to advance public and private action on climate change through rigorous, innovative research.
  2. The Grantham Research Institute on Climate Change and the Environment ( was launched at the London School of Economics and Political Science in October 2008. It is funded by The Grantham Foundation for the Protection of the Environment (



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