The Bank of England has been called to intensify efforts to bring the finance industry into line with the UK's climate targets.
Prominent Economists and Advocacy Organizations Urge Bank of England to Prioritize Climate Goals
More than fifty prominent economists and advocacy organizations alerted Governor Andrew Bailey in a letter on Monday that the Bank is falling behind other major central banks in its efforts to implement important green initiatives as it picks up speed.
The letter included: “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.”
Among the signatories are: previous UK sustainable development commission chairman Jonathan Porritt, former lead author of the Intergovernmental Panel on Climate Change Julia Steinberger, the WWF, the Green Alliance, and industry coalition bankers for net-zero.
They expressed their "great disappointment" with the Bank's decision to cut back on funding for efforts related to climate change.
Speaking recently before the Lords Economic Affairs Committee, Mr. Bailey stated that the Treasury's revised set of priorities for the financial services industry led to this decision.
In November, the Treasury said that efforts to "align private sector financial flows with environmentally sustainable and resilient growth" would no longer be prioritized in a letter to the Bank's financial policy committee (FPC).
However, the economists and activists underlined in their letter that climate remains an essential mandate of the FPC for financial stability, as well as one of the government's broader economic policy objectives.
"Such a change should not undermine the Bank's work in this area," they said in a statement.
“We therefore urge you to reprioritize 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.”
Bank of England Urged to Prioritize Climate Risks as Threats to Financial Stability Grow
The signatories highlighted that climate change and environmental decline broadly represent a threatening risk to the bank's duty to maintain price balance.
The letter coincides with Mr. Bailey's fourth anniversary as governor of the Bank and follows the three-year anniversary of the Bank's monetary policy committee receiving a green mandate.
It acknowledged the Bank's early efforts on climate change, including the corporate bond acquisition scheme, climate-related requirements for the energy market financing scheme, and its very own climate-related monetary disclosures.
The signatories expressed concern that progress beyond these preliminary steps on stress evaluations and disclosures seemed to have stagnated.
They said that other major central banks have outperformed the Bank of England on this front in the last four years.
The letter included: “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 incentivize 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.”
It occurs as the BoE prepares to issue its latest interest rate decision on Thursday, when rates are expected to remain unchanged at 5.25%.
A Bank of England representative stated: “Work on the financial risks and macro-economic impacts from climate change remains a priority for the Bank.
“Its work in this space is rooted in delivering its core mandate of price and financial stability.
“The November 2023 HM Treasury remit letter for the Bank’s Financial Policy Committee includes less emphasis on working with Government on the UK’s transition to net-zero in areas less intrinsic to its objectives.”