Central Bank of Malta aligns asset holdings to carbon neutrality targets

The Central Bank of Malta (CBM) is increasingly aligning its bond and equity portfolio to the European Union’s climate targets in a bid to “benefit from the opportunities arising from the transition to low carbon economies, whilst financing the said transition.”

In its 2024 climate-related financial disclosures report, released on Tuesday (today), the CBM shared its ongoing efforts towards transparency, accountability, and a proactive climate-risk management policy for its non-monetary policy portfolios.

The CBM said that it has significantly increased its green and thematic bond holdings, which now constitute circa 10 per cent of its assets under management, which total €2.6 billion.

Most of the bank’s equity funds are now aligned with the Paris Agreement requirements, with actions underway to replicate this alignment in its externally managed corporate bond holdings.

It said that “in line with the EU’s 2050 carbon neutrality target, during 2023 the bank has switched most of its equity holdings to passive exchange-traded funds (ETFs) that track MSCI Paris Aligned Benchmark indexes.”

This ensures investments are directed towards companies poised to benefit from a low-carbon economy while simultaneously minimising exposure to climate-related financial risks.

The CBM also holds some exposure to low carbon equity indexes. These indexes invest in companies which have high ESG ratings.

The remaining equity exposures are to active funds that seek to increase long term growth and return by investing in companies that are substantially engaged in several areas of the climate transition, including sustainable energy.

“Through these funds, the bank is seeking to benefit from the opportunities arising from the transition to low carbon economies, whilst financing the said transition.”

The bank said that it continues to diversify its assets under management, incorporating sustainability as a fourth pillar in its Strategic Asset Allocation process.

“This integration has to date ensured that the increase in holdings does not result in a significant deterioration in most of the bank’s normalised metrics.”