Last week heralded a major breakthrough in how the Bank of England is responding to the risks posed by climate change. Governor Mark Carney announced that the Bank will disclose how financial risks from climate change are managed across its entire operations.

Significantly, the Bank has also committed to disclose how it manages the climate risk associated with its pension scheme, after pressure from Positive Money and ShareAction.

While the Bank has been warning for some time about the risks that climate change poses to the financial system, it’s been slow to follow its own advice, with accusations that certain operations including its corporate bond purchase programme have given an implicit advantage to fossil fuel companies.

And while the Bank has encouraged other investors to report on their management of climate risk, working with other central banks and regulators to establish the ‘Taskforce on Climate Related Financial Disclosures’, the words ‘climate change’ haven’t appeared in any previous annual report of the Bank’s own pension fund.

Positive Money and ShareAction wrote to the chair of the scheme, requesting further information on the scheme’s efforts to implement the TCFD recommendations. We argued that other actors within the finance system are looking to the Bank of England to set an example through its actions as well as its words.

The scheme’s chair John Footman responded, saying that the Bank will now include a section on climate risk in its annual report. He explained that because the scheme is invested primarily in gilts and government-backed securities, there’s limited scope for making an assessment of climate change exposure. But he acknowledged that this should be made explicit in its annual reports going forward.

We’re still hopeful that the scheme can go further, and be a thought leader on how gilts, including UK government gilts, will be affected by climate change. Climate change poses risks and opportunities for every part of the economy and every asset class. Government-backed securities are no exception.

We’ve responded to Mr Footman arguing that the Bank of England could do more work to model gilts’ exposure to climate risks, which could be useful to other asset owners in the UK and abroad. The data and research on the topic is currently limited and there is an opportunity, given the concentrated portfolio of the Bank of England pension scheme, to support wider research.

Mark Carney has rightly acknowledged that addressing climate change will require a “massive reallocation of capital”. This is unlikely to happen unless the Bank of England plays a leading role. The fact that the Bank will begin reporting on its pension fund’s climate risk, alongside that of its other operations, is an important first step.