BoE told to ‘reprioritise’ climate work as it ‘falls behind’ other central banks

By Staff

More than 50 leading economists and campaign groups have signed a letter to the Bank of England urging it to step up its work to align the financial sector with UK climate goals

The Bank of England is being urged to do more to make sure the financial sector is helping the UK reach its climate goals.

Over 50 top economists and campaign groups have written a letter to Andrew Bailey, the Governor of the Bank of England, saying it is falling behind other big central banks on green measures. The letter said: “With the world having now reached the pivotal point of the first year-long breach of the 1.5C warming limit committed in the Paris Agreement, delays are no longer tenable.”

People who signed the letter include Julia Steinberger, who used to be the lead author for the intergovernmental panel on climate change, Jonathon Porritt, who used to be the chair of the UK sustainable development commission, as well as the Green Alliance and industry coalition bankers for net zero.

They wrote they are “extremely disappointed” that the Bank has reduced resources towards climate change work. Mr Bailey recently told the Lords Economic Affairs Committee that this decision was made after the Treasury changed what it thinks the financial services sector should focus on.

In November, the Treasury wrote to the Bank’s financial policy committee (FPC) saying that work to “align private sector financial flows with environmentally sustainable and resilient growth” would no longer be a priority. In their letter, the economists and activists pointed out that climate change is still a key part of the FPC’s job to keep our money safe.

“Such a change should not undermine the Bank’s work in this area,” they wrote. “We therefore urge you to reprioritise work to align the financial sector with the Government’s climate goals, reverse resource cuts for this work and reassert the Bank of England as a climate leader as a matter of urgency.”

The letter stressed that climate change also poses a serious risk to the Bank’s goal of keeping prices stable. The letter was sent on Mr Bailey’s fourth year as boss of the Bank. It also comes just after the three-year anniversary of the Bank’s money policy team being given a green mandate.

The letter praised the Bank’s early work on climate change. This includes things like the corporate bond purchase scheme, rules related to climate change for the energy markets financing scheme and the Bank’s own reports on how climate change affects finance.

But the people who signed the letter warned that progress seems to have stopped after these first steps on stress testing and disclosures. They said other major central banks have done more than the Bank of England on this issue in the last four years. The letter stated: “Major central banks have now begun adjusting collateral frameworks and capital requirements to reflect climate risks and momentum is building towards the use of green-term funding schemes to incentivise green lending.

“Progress made by other central banks also reflects mounting evidence that attempts to model the financial risk posed by climate change and biodiversity loss are failing woefully to reflect climate science, requiring a precautionary approach.”

Meanwhile, the Bank is getting ready to announce its latest decision on interest rates this Thursday. It’s expected that they will be kept steady at 5.25%. The Bank of England has been asked to comment.

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