(2020b), “When markets fail – the need for collective action in tackling climate change”, 28 September; Schnabel, I. (2021a), op. cit. 33. Economic theory shows that when economic agents fail to internalise the full cost of their individual actions and/or there are informational frictions that prevent them from adequately pricing assets, market forces lead to a suboptimal allocation of resources. 34. Article 127(1) of the TFEU forms the basis for the primary and secondary mandates of the ECB. Primary mandate: “The primary objective of the European System of Central Banks (hereinafter referred to as ‘the ESCB’) shall be to maintain price stability.” Secondary mandate: “Without prejudice to the objective of price stability, the ESCB shall support the general economic policies in the Union with a view to contributing to the achievement of the objectives of the Union as laid down in Article 3 of the Treaty on  European Union.” In addition, “The ESCB shall act in accordance with the principle of an open market economy with free competition, favouring an efficient allocation of resources.” 35. See Lipsey, R.G. and Lancaster, K. (1956), “The general theory of second best”, The Review of Economic Studies, Vol. 24, No 1, pp. 11–32. 36. See Papoutsi, M., Piazzesi, M. and Schneider, M., (2021), “How unconventional is green monetary policy”, Working Paper. 37. See Schnabel, I. (2021a), op. cit. 38. See Greenpeace (2021), “Greening the Eurosystem collateral framework”, March. The executive director of Greenpeace International, Jennifer Morgan, has also recently argued in favour of exclusion policies.

The ECB’s research department is working on an ambitious climate  change research agenda and aims at further intensifying the exchange with other central banks and with the academic community. This Symposium is an example of institutional collaboration that advances the current frontier of knowledge. These considerations have three important implications for the ECB. First, central banks have a range of instruments at their disposal. While our mandate imposes certain restrictions on our ability to act, combining some or all of these instruments could serve as a powerful contribution to accelerating the green transition. Second, despite the variety of the instruments in the toolkit, they all have one thing in common: they show that central banks can act as a catalyst and thought leader by prompting other financial market participants to pre-emptively enhance their analysis of and resilience to climate risks. Third, the array of possible tools suggests that central banks should employ an all-encompassing approach in adjusting their instruments and monetary policy framework to enhance climate protection, within the remit of their respective mandate. This includes scrutinising well-established conceptual frameworks that have previously guided the implementation of our monetary policy. In the context of the ECB’s asset purchases, the shortcomings of the market neutrality principle illustrate the need to reconsider the merit of previous practices that may be at odds with fostering the transition to a carbon-neutral economy. From market neutrality to market efficiency So far, the market neutrality principle has guided the implementation of our private sector asset purchase programmes.