New report calls for Bank of England to be ‘hardwired’ for climate change

• Report assesses the role of the central bank in tackling climate change, recommending mandate reform and new policies

• Policy recommendations range from the Bank of England disclosing its fossil fuel investments, to overt monetary financing (or ‘QE for People’)

• Launch event to feature contributions from the Chair of UK’s Committee on Climate Change, Lord Deben, as well as Shadow Minister Barry Gardiner

LONDON, 15th May 2018 – Research and campaign group Positive Money is today launching a new report calling for the Bank of England to be given a new mandate and set of tools to actively promote the transition to a low-carbon economy.

‘A Green Bank of England: Central Banking for a Low-Carbon Economy’ assesses the central bank’s monetary policy framework from an environmental perspective. It challenges the Bank’s record on climate sustainability and concludes that reform of its mandate is necessary to meet the economic challenge posed by climate change.

The report breaks new ground by looking at climate change through the lens of investment as well as financial stability. It makes a number of macroprudential and monetary policy recommendations to reduce the financing of fossil fuels, decarbonise the financial sector, expand investment in green sectors, and increase the coherence of the Bank of England’s climate policy positions.

Among the recommendations:

• the Bank of England should disclose the carbon risk of the assets on its own balance sheet, and should no longer buy bonds issued by fossil fuel companies via its QE programme;

• the Treasury, in concert with the Department for Business, Energy and Industrial Strategy, should review the Bank’s monetary policy framework through the lens of the impact of climate change on the UK economy and consider changes to the Monetary Policy Committee’s mandate;

• the Bank should consider how overt monetary financing (often referred to as ‘QE for People’) could be utilised to drive green and sustainable investment in the UK.

The research suggests that the UK will be unlikely to meet the decarbonisation targets set out in the Climate Change Act 2008 unless the central bank responds to climate change through an investment lens. It argues that the Bank of England’s monetary policy in recent years has been actively harmful to decarbonisation efforts, with corporate bond purchases through its QE programme being skewed towards high-carbon sectors.

Author of the report, Positive Money economist Rob Macquarie, said:

“The climate crisis and the low-carbon transition presents a fundamental challenge for finance, changing the context for central banking. Central banks underpin and oversee the financial and monetary system and have enormous resources at their disposal, so must do more to support the green transition.

“By focusing solely on climate change as a risk to financial stability, the Bank of England runs the risk of leaving meaningful action until it is too late. Climate change also threatens the long-term viability of the economy, which is of concern to the Bank, but cannot be addressed by looking at financial stability alone.

“The Bank of England’s mandate must be hardwired for sustainability and climate change.”

‘A Green Bank of England’ will be launched at an event in Parliament this morning, with a panel featuring the Chair of the UK’s Committee on Climate Change, Lord Deben, Shadow Minister for International Climate Change, Barry Gardiner MP, and Liberal Democrat Energy and Climate Change Spokesperson, Baroness Featherstone.

Notes

About the report

‘A Green Bank of England: Central Banking for a Low-Carbon Economy’ was funded by Partners for a New Economy and authored by Positive Money economist Rob Macquarie. A full version of the report can be viewed here.

About Positive Money

Positive Money campaigns for a money and banking system which supports a fair, democratic and sustainable economy. Set up in the aftermath of the financial crisis, Positive Money is a not-for-profit company funded by charitable trusts and foundations, as well as small donations from its network of over 65,000 supporters.