German central bank chief Jens Weidmann said Tuesday that monetary policy should not be used to fight climate change, contradicting incoming European Central Bank head Christine Lagarde before she takes office.
"I see very critically calls for a green monetary policy," Bundesbank head Weidmann told a Frankfurt conference.
Preferentially targeting "green" bonds for ECB asset purchase programmes "would contravene the Treaty on European Union" which demands "market neutrality" from monetary policymakers, he added.
Weidmann also warned that the Eurosystem — made up of the ECB and the central banks of the 19 euro area nations — could find itself with "conflicting aims" if the pursuit of its overarching inflation target demanded it sell off bonds, but it came under pressure to keep buying green debt.
The German's sally comes three days before new boss Lagarde takes the reins in Frankfurt, replacing Mario Draghi.
During a hearing before European Parliament lawmakers last month, the Frenchwoman said that fighting climate change should be added to the ECB's objectives.
The central bank should take into account a taxonomy of green assets presently being discussed between national capitals, Lagarde proposed.
What's more, green assets should influence the risk assessments carried out by the ECB's banking supervision arm, she added.
Weidmann countered that it would be "mistaken to use banking regulation to set climate policy incentives", saying it was up to politicians to intervene in business that way.
Nevertheless, his own Bundesbank is looking to invest in green bonds, both on its own balance sheet and with money from funds it invests on behalf of government bodies' pension schemes.
