climate change

Sustainability

It is important for central banks to consider climate, environmental, social, and governance issues in their operations. A consistent and systematic approach to these areas enables better adaptation to rapidly changing conditions and helps to understand how climate and social risks increasingly impact both national economic resilience and the successful functioning of organizations. Central banks guide the financial sector through both regulations and leading by example, raising awareness of climate impacts and promoting social responsibility. An approach based on sustainability principles enhances credibility and ensures alignment with long-term global sustainability goals.

Climate change and the central bank

The European Central Bank added targets for climate change to its strategy in 2021 and reiterated this commitment in the strategy review in 2025. The physical and transition risks of climate and environmental change affect the core task of the central bank of maintaining price stability through the macroeconomy and the financial system.

Central banks are not responsible for climate policy and the most important tools that are needed lie outside of our mandate. But the fact that we are not in the driving seat does not mean that we can simply ignore climate change, or that we do not play a role in combating it.

President of the European Central Bank Christine Lagarde 25 January 2021, speech to the ILF conference on Green Banking and Green Central Banking

The European Central Bank has three main objectives for its work on climate change:


After the initial summaries, the European Central Bank decided to expand its work on climate change and has focused in depth on three areas since 2024, along with detailed plans:

A more comprehensive overview can be found on the European Central Bank's website.

The activities of the European Central Bank also guide the actions of Eesti Pank and other central banks in the euro area.

Eesti Pank joined the Network for Greening the Financial System (NGFS) in 2020 to improve its understanding of how climate change and the transition to a carbon-neutral economy affect the economy and the financial system. It works together with other central banks from the Nordic and Baltic countries on climate issues and advises international organisations like the IMF and the OECD in national reports. Eesti Pank also made climate commitments at the United Nations COP26 Climate Change Conference in 2021, setting targets for supporting the efforts to halt global warming and adapt to the changes, which is needed to meet the Paris climate agreement.

The Eesti Pank strategy has placed special focus on sustainable development and climate issues from autumn 2021 and the targets and action plan are updated regularly. The Eesti Pank environment and climate committee headed by Deputy Governor Martti Randveer makes proposals to the central bank Executive Board on how to meet the targets. The central bank assesses every year the success at meeting targets that have been set and it reports progress in its annual report.

  • “Every responsible organisation these days needs to keep watch of its own environmental impact. It is important for us at Eesti Pank to limit the environmental footprint of the activities of the central bank and to understand how climate change and climate policy affect the Estonian economy and financial sector.” Ülo Kaasik, governor of Eesti Pank

The focus for Eesti Pank is on

  • analysing the impact that changes and risks arising from climate change and climate policy objectives have on the economic environment and competitiveness, and on financial stability and the financing of the economy
  • integrating the European Union climate goals into monetary policy of euro area and investing the Eesti Pank reserves
  • reducing the environmental impact of cash
  • developing statistics on climate change
  • taking account in the management of the organisation of social responsibility criteria
  •  reducing the environmental impact of the bank’s own activities.

1. The impact of climate change and climate policy on the economic environment

Eesti Pank has produced analysis on how climate and environmental policy impact competitiveness. This primarily affects Estonia through the earlier importance of oil shale in the Estonian economy, but also through other activities that leave a footprint on the environment.

A climate policy that limits the use of older and more polluting sources of energy can lift inflation temporarily and affect end consumers through industry, transport and energy production. This means that economic forecasts must also include estimates of external impacts that come from carbon markets like the ETS or the planned ETS2 for transport. Eesti Pank looks not only at the direct impact of inflation for energy in the form of electricity, heating, gas and fuels, but also analyses how energy costs can be passed through to consumers through the products and services that businesses provide.

Climate policy is also intertwined with security, since burning less fossil fuel reduces dependence on unfriendly countries that supply those fuels. The energy price shock in 2022 caused a sharp rise in inflation in the countries of the euro area because of their heavy dependence on fossil fuels and on hostile energy producers. The vulnerability of the whole world was shown in spring 2026 when Iran closed a bottleneck for oil transit and prices for fuels shot up rapidly. The European Central Bank has also underlined the importance of energy independence and security for Europe:

  • Member of the ECB’s Executive Board Frank Elderson (link) Europe’s fossil fuel dependence poses risks to price stability (07.04.2026)
  • Member of the ECB’s Executive Board Piero Cipollone (link) The new energy shock: economic scenarios and policy implications (06.05.2026)

The impact of climate change is also felt by consumers through higher food.  As the consumer basket contains agricultural produce from around the whole world, troubles that may at first seem far off can also pass into prices in Estonia. This means that estimates for inflation need to pay attention to the effects of climate change, which have made fluctuations in food prices more common and wider.

Eesti Pank works on climate issues with the European Central Bank and the central banks of the euro area through committees and working groups. The forecasting working group for example has looked at how the effects of climate change and climate policy are considered in forecasting models. Fiscal policy working group analyses the policy measures of governments that concern climate issues.

For more see:

Read more on the position of the European Central Bank:

  • ECB Chief Economist Philip Lane (link) Climate change and monetary policy (05.06.2026)
  • ECB, Christine Lagarde (link): Mind the gap: what it takes to finance a greener future (12.11.2024)

2. The impact of climate change and climate policy on financial stability

The transition to a low-carbon economy is a necessary one, but the changes that society needs to make to transition to a climate-friendly economy will equally be accompanied by risks for the financial sector.

Eesti Pank assesses the climate risks to the Estonian financial sector regularly so that it can if necessary increase the resilience to climate risk of the financial sector as a whole. Physical risks being realised would mean the financial sector would face increased insurance losses, falls in the value of loan collateral, and reduced solvency for borrowers. Credit risk management by credit institutions will have to consider the climate and environmental risks in all stages of the lending process, and the risks of portfolios will need to be monitored.

For more on estimating climate risk see:

The financial sector has an important role to play in slowing climate change and speeding up the transition to a low carbon economy because of its ability to affect various stakeholder groups through financing conditions. The financial sector can also affect those processes by for example:

  • investing in solutions with low-carbon emissions
  • funding work to adapt to climate change
  • reporting on how projects impact the climate and raising awareness of it

For more on how climate risk affects the financing of the economy, see:

3. Investment that considers climate risk

Taking the risks and opportunities of climate change and the green transition into account is becoming a normal part of the investment process when the central bank makes decisions about investing assets and managing risks.

  • Eesti Pank follows the principles of sustainable and responsible investment in managing its reserves, acknowledging climate risk as financial risk and striving to achieve a climate-change resilient investment portfolio.
  • Beyond the goal of earning financial returns, the central bank considers it important to reduce the greenhouse gas emissions financed by its portfolio investments and to achieve a climate-neutral portfolio by 2050.
  • The central bank understands a climate-neutral portfolio to mean investing its assets, including the funding of climate solutions, in line with the goals of achieving net zero emissions of greenhouse gases globally.

Starting in 2023, Eesti Pank together with the other central banks of the Eurosystem will disclose the key climate metrics of its investment portfolio on an annual basis. These metrics are based on harmonised data sources and are aligned with the Eurosystem’s common framework for climate-related financial disclosures, which can be found in more detail here.

See also:

4. Climate risk in monetary policy measures

Integrating climate risks into the monetary policy framework of the Eurosystem helps limit the financial risks from the climate on the balance sheet of the Eurosystem and helps make monetary policy instruments function more efficiently in a changing economic environment. Eesti Pank is working with the European Central Bank and the other central banks of the euro area to improve its capacity to estimate climate risks.

The Eurosystem is applying a climate factor from the second half of 2026 when estimating the value of assets issued by non-financial companies that are submitted to central banks as eligible collateral, and it takes account of how climate-related transition risks may affect the value of those assets. The measure is intended to make the Eurosystem more resilient to the financial risks arising from climate change and to keep monetary policy operations effective and credible, as explained in a press release.

The Eurosystem decided from 2022 to reduce gradually the carbon intensity of its portfolio of corporate bonds purchased within the asset purchase programmes in line with the goals of the Paris Agreement. The policy of climate tilting from 2023 meant that purchases of corporate bonds were focused more on issuers with better climate indicators and transition programmes (climate tilting). Reinvestment of financial instruments was ended in 2025, but the securities that are already in the portfolio are being held until maturity. For more on the policy see here.

Having a high quality and comparable set of data is of critical importance for assessing climate and natural risks adequately. The sustainability reporting framework of the European Union has an important part to play in this as it should make public data on sustainability more accessible and comparable. Until the Corporate Sustainability Reporting Directive (CSRD) is fully implemented, those data cannot be widely used in monetary policy measures.

5. The environmental footprint of cash

The Eurosystem, including Estonia as a member of it, are looking for ways to reduce the environmental impact of banknotes and coins, and this is an important part of the cash strategy of the Eurosystem.

Eesti Pank’s efforts for more sustainable cash:

  • The paper used for making the euro banknotes ordered by Eesti Pank has been made of 100% sustainable cotton since 2019.
  • A rounding rule came into effect in Estonia from 1 January 2025 as part of the Act on Introduction of Euro and Euro Cash Settlements and so there will now be substantially less demand for one and two-cent coins. Several other countries in the euro area have already stopped issuing one and two-cent coins.
  • Eesti Pank has added environmental criteria to its procurement conditions for circulation and collector coins, such as requiring the mint to use renewable energy in its production processes and recycled or recyclable material in its packaging.
  • Banknotes that are not fit for circulation are destroyed and compressed, and then sent to produce energy in combined heat and power plants.
  • The central bank is constantly looking for new ways to reduce the environmental impact of its everyday working processes, such as using reusable packaging or recycled materials.

The European Central Bank researched the life-cycle footprint of banknotes in all the euro area member states including Estonia in 2021 and the results of the survey were published in the end of 2023. It is planned to run the research again in 2027.

For more see:

  • 28.02.2025 The rounding rule brought a record amount of small coins back to the central bank – in Estonian
  • 27.12.2024 The rounding rule will start to apply to payments in cash from the new year – in Estonian
  • 2024 Martti Näksi The rounding rule will make cash circulate more sensibly – in Estonian
  • 11.12.2023 The ECB is publishing the results of its research into the environmental impact of euro banknotes – in Estonian

6.  Developing statistics to take account of climate change

Data on the climate are important so that the climate risks to monetary policy and financial stability can be assessed more accurately. The contribution of statistics lies above all in ensuring the quality of the data used to develop the statistics that support analysis of the risks of climate change. Eesti Pank has not yet compiled climate indicators but it participates in the joint statistical work of the European System of Central Banks and helps ensure the quality, comparability and timeliness of the climate data.

The European Central Bank has been disclosing statistical indicators on sustainable financing, emissions and risks since 2023. The indicators on sustainable financing primarily give a picture of the market for sustainable bonds and their role in financing the green transition. The indicators on emissions and risks cover shares and loans as well as bonds, and allow the contact between the financial sector and the transition risks coming from the green transition in the economy and physical climate risks caused by climate change to be assessed. The indicators are extended and updated regularly to improve the methodologies used for them and expand their coverage. The indicators for sustainable financing are disclosed at an equivalent level of quality to the official statistics, while the indicators for emissions and physical climate risks are currently mainly used for analysis. They are compiled using some estimated data and methodologies that are still being constantly developed. The statistical indicators on climate change were last updated in November 2025.

The euro area continues to develop its indicators for sustainable financing. The statistical strategy of the euro area aims to make sustainability more transparent with information on shares and loans as well as bonds. The European Centralised Securities Database, which labels green securities and plans to add other indicators for sustainable investment, is also being used. New international statistical standards will apply in 2030 that will require sustainable instruments to be shown separately from other financial instruments.

A sustainable organisation

Eesti Pank is developing its environmental awareness and its social responsibility. The long-term goal is to be climate neutral by 2050.

To this end, Eesti Pank applies the principles of the green office (link), and this is an integral part of the culture of work and the organisation. The Eesti Pank buildings received a green office certification in 2022, and the Estonian Association for Environmental Management awarded Eesti Pank and Finantsinspektsioon the title of the best green office of 2022. The organisation advanced its qualification by one level in 2025 to the intermediate level and was awarded the title of innovator of the year. 

Eesti Pank joined the Equality, Diversity and Inclusion Charter (link) drawn up for the European System of Central Banks and the Single Supervisory Mechanism at the initiative of the European Central Bank in summer 2022, taking on the obligation to promote a strong working environment built on honesty and dignity that has no place in it for any form of discrimination. We have previously given great priority to employee well-being, equal treatment and inclusion, but these principles will now be applied even more systematically. We have reviewed our current practices and started improving awareness among employees. The Estonian Chamber of People with Disabilities carried out an audit of access in the Eesti Pank buildings in 2023 and their recommendations for renovation work have been taken into account. The Estonian Human Rights Centre awarded Eesti Pank the "Respecting Differences" label in 2024 to recognise it as a diverse workplace. Eesti Pank joined an initiative by employers to tackle domestic violence in 2026 that is committed to preventing and reducing violence against intimate partners by improving awareness of it among employees.

Eesti Pank’s strengths in applying the principles of the green office:

  • staff who are aware of environmental values and consider the environmental impact of their activities
  • dedication and support from the management for developing an environmentally sustainable working environment
  • the environmental and climate committee and the green office working group as active working groups

Examples of the work of Eesti Pank:

  • regular Green Morning seminars to raise awareness among staff
  • monitoring of the bank’s carbon footprint and efforts to reduce it under the environmental action plan
  • social responsibility, health and safety work, and a commitment to equality
  • good conditions for coming to work by bicycle
  • health insurance for employees and subsidies for movement and sport

The main goals in the coming years:

  • making the Eesti Pank buildings more energy efficient
  • working with the Estonian Chamber of People with Disabilities to improve access to the buildings and making them more user-friendly so that people with special needs can move around them more easily
  • developing and modernising the environmentally-friendly working environment
  • continuing ongoing information work about equality, diversity and inclusion
  • developing analysis of the organisation

Moving towards climate neutrality needs the central bank to reduce its CO2 footprint consistently. We have compiled an action plan with target levels for environmental goals and metrics and we report each year on the steps taken to reduce the environmental impact of the organisation.

Our achievements so far:

  • Scope 1 emissions, which are direct emissions from fuel combustion, have remained moderate
  • Scope 2, or indirect, emissions have been cut substantially because 
    • we have been using 100% renewable energy since 2021,
    • we have optimised the electricity and heat energy consumption of our buildings,
    • we have increased the energy efficiency of buildings through various renovation projects that are still ongoing, and
    • we installed solar panels with a capacity of 7.7 kW in autumn 2023;
  • Scope 3 emissions from the supply chain have been reduced by our green office approach and the principles we have applied like sorting waste, and changing how we organise events and run procurements. The number of business trips taken by staff increased again in 2022–2025. Such trips had a much smaller impact than usual during the pandemic. Commuting by staff between home and office has become more environmentally sustainable at the same time, which is shown in the conscious choices people have made about modes of transport.

We are constantly looking for ways to make long-term and lasting reductions in the footprint of our office activities by using new technology, for replanning the air-conditioning and internal climate of the bank’s buildings for example. Environmental principles will continue to be developed further and integrated into our working processes. We should be aware though that it will become increasingly difficult to reduce the environmental impact of the infrastructure and ways of working needed for the central bank to do its work in several areas if providers of the services and products that we need, like energy for heating, or air travel, do not engage equally.

The environmental impact assessments carried out over several years have shown that the methodologies used are evolving rapidly – whether in terms of underlying data sets, emission factors, or accounting principles. However, this development makes it increasingly challenging to compare results across different years and to set emission-based target levels.

We consider it essential that environmental sustainability is an integral part of our organisation’s daily operations. We consequently set our goals and directions primarily by monitoring consumption indicators and making substantive choices in response.

See also:

 

Analysis and impact assessment

Estonian Competitiveness Report

  • 2023 The impact on competitiveness of support measures taken to ease the energy crisis; Drivers of environmental innovation in Estonia and in other EU countries; Recent climate policy developments and Estonian competitiveness
  • 2022 How developments in climate policy affect the competitiveness of Estonia; The ESG rating of countries
  • 2021 Climate change and climate policy from the perspective of the central bank; Carbon prices and the Estonian economy
  • 2020 The impact of climate regulations on the Estonian economy, covering also the concept of the green economy and competitiveness

Expert group on competitiveness

  • Report of the expert group on competitiveness to the Riigikogu (June 2025) (link)  – in Estonian
  • Report of the expert group on competitiveness to the Riigikogu (June 2024) – in Estonian

Estonian Economy and Monetary Policy

  • 4/2021 The impact of energy costs for businesses and their possible pass-through to households

Financial Stability Review

  • 1/2025 Appendix 2. The carbon intensity of the corporate loan portfolio of the banks
  • 1/2024 Appendix 1. The carbon intensity of housing loans is estimated to be quite low
  • 2/2022 Assessing the transition risks in the banking sector
  • 2/2020 The financial sector needs to consider the possible sharp changes needed for a transition to an environmentally sustainable economic model

Financing of the Economy

  • 2026 Incorporating the climate performance of companies into credit conditions
  • 2023 Green and environmentally friendly financial products in the Estonian banking sector
  • 2022 Use of environmentally-friendly loan products by banks in Estonia
  • 2017 The funding of investments to support a low-carbon economy

Blogs (in Estonian)

  • 2025 Anita Suurlaht-Donaldson The carbon footprint of the banks depends largely on the businesses they have lent to
  • 2025 Ülo Kaasik Investing during a time of climate change
  • 2024 Martti Näksi The rounding rule will make cash circulate more sensibly
  • 2024 Anita Suurlaht-Donaldson Eesti Pank assessed the climate risk of housing loans
  • 2024 Peeter Luikmel The green transition choices of central banks
  • 2022 Anita Suurlaht-Donaldson The banks in Estonia are aware of the risks of the transition to a climate-friendly economy
  • 2021 Raido Kraavik The financial sector increasingly needs to consider climate risks
  • 2021 Madis Müller Several changes are ahead for monetary policy in the euro area
  • 2020 Riina Hanso What are the European Commission’s development goals for the financial sector for the next four years?
  • 2020 Maive Rute Central banking is turning green

Working Papers and Occasional Papers

  • 2/2024 Jaanika Meriküll. The impact of climate change and policies on productivity
  • 9/2019 Cécile Couharde, Olivier Damette, Rémi Generoso and Kamiar Mohaddes. The Effects on Growth of El Niño and La Niña: Local Weather Conditions Matter

Press releases

  • 28.02.2025 The rounding rule brought a record amount of small change back to the central bank – in Estonian
  • 27.12.2024 The rounding rule will start to apply to payments in cash from the new year – in Estonian
  • 30.01.2024 ECB steps up climate work with focus on green transition, climate and nature-related risks
  • 11.12.2023 ECB publishes study on environmental impact of euro banknotes
  • 26.07.2022 ECB launches equality, diversity and inclusion charter
  • 4.11.2021 Eesti Pank is setting itself green development targets
  • 8.7.2021 ECB presents action plan to include climate change considerations in its monetary policy strategy
  • 5.2.2021 Eurosystem agrees on common stance for climate change-related sustainable investments in non-monetary policy portfolios
  • 17.1.2018 It is time to talk about reducing the use of one and two-cent coins

Assessment of carbon footprint

Annual reports

Public events

  • 25.11.2020 A joint virtual roundtable for Eesti Pank and civil society organisations

 

Last updated: 10.07.2026