On Friday, Andrew Hauser, executive director of the Bank of England market, announced the central bank’s intentions for next year to seek the Treasury support to incorporate climate risk into the asset purchasing methodology.
In his speech to the Investment Association, Hauser said:
“Two percent of banks’ asset purchasing facilities consist of Sterling bonds acquired as part of MPC’s quantitative easing program. As stated in the TCFD disclosure, the MPC’s asset purchasing framework is determined by the committee’s authority given by the Prime Minister. However, the scope of the government’s intention to renew this authority will be considered over the next year to consider how to incorporate climatic factors into decisions regarding financial assets combinations while achieving policy objectives.”
The move follows a similar approach taken by ECB president Christine Lagarde just two days ago, and the Prime Minister is now being asked by climate activists to coordinate the bank’s quantitative mitigation programme along with the government’s own climate commitments and the next budget.
Today’s move represents an initial statement of intent as Andrew Bailey pledged in March to “first” his “priority.” Since then, in April, fossil fuel producers have been featured on the renewal list of eligible bonds for more company QE.
In June, the Bank of England’s climate-related financial disclosures showed that the world would experience 3.5 degrees heating in 2100 if the expected emissions performance of the bank’s bond portfolio represented the emissions performance of the company worldwide.
The bad years the fossil fuel giants suffered are set even more severe between BOE’s new strategic proposals and the pressure from campaigners to stop banks from including BP and Shell in their bond buying program.
Speaking about the update, Franboit, executive director of Positive Money, said:
“It’s positive that we hear that the Bank of England is finally moving forward with proposals to ensure that asset purchases are not fueling the climate crisis, but progress seems worryingly slow. The bank says it will consider incorporating climate over the next year, more than six months after Andrew Bailey told MPS that it will be a priority in March.”
“More than ever, action needs to occur more urgently, especially as the Bank of England responds to the worsening economic outlook. The bank’s own disclosure suggests that current bond purchases currently fuel global heating at 3.5C, more than twice the 1.5C limit the government has committed to pursue through the Paris Agreement.”
“The Bank of England and the Treasury should work to ensure that central bank powers are updated and support the government’s net zero strategy in the next budget.”
