Green Quantitative Easing

Green quantitative easing (GQE) is similar to classical quantitative easing. It is a form of monetary policy in which countries’ central banks purchase securities in their portfolios.

The main difference with green quantitative easing is that central banks do not buy just any assets but assets that are used to finance sustainable and environmentally friendly projects, such as green bonds.

Moreover, classical QE is a temporary program to stabilize a country’s economy, while green quantitative easing is intended for long-term commitments by central banks. The main goal of GQE is not economic growth but to help the economy transition to sustainable development.

A Central Bank can buy green bonds issued by both public and private organizations.
In addition, a GQE program can have a positive impact on job creation by increasing economic activity in the green sector.
Support from central banks can help mitigate risk for green bond investors.

By buying green corporate bonds, central banks help to lower the interest rate on these bonds. As a result, corporate interest in investing in renewable energy and energy efficiency projects increases. The lower cost of borrowing on the market encourages companies to issue bonds instead of taking bank loans.

The GQE program is actively used by the ECB; the portfolio can be viewed at the link.