The Bank of England has publicly warned about the “devastating effects” of climate change many times but done very little to end its own implicit support for fossil fuels, including the dirtiest one of all: coal. In this guest blog, Justin Guay from The Sunrise Project and Brett Fleishman, finance director of 350.org, argue the Bank must take note and learn from its foreign counterparts if it’s to really tackle the climate crisis we currently face.
Calls for the financial system to wake up to the looming threat of climate change are growing louder by the day. Those calls have been coming most clearly from the Bank of England under Governor Mark Carney, who last week warned the treasury committee of global finance’s role in driving the climate crisis.
The problem is that despite his rhetorical leadership on climate change, the Bank of England has a coal problem.
The United Kingdom was the birthplace of the Industrial Revolution, and home to a power mix that as recently as 2012 was 40 percent coal-powered. Yet it has emerged as a global leader in the transition beyond coal.
Within the span of just a few short years the U.K. has nearly eliminated the dirtiest of fuels, regularly going weeks at a time with no coal power at all. That’s an amazing evolution that demonstrates to the world that it’s possible to transition beyond coal by 2030 in advanced economies (and 2040 globally), as the latest climate science dictates.
But while the U.K. government has aligned national policy to phase out coal use, its very own central bank, which has been the world’s most vocal financial champion of limiting the risk from climate change, is conspicuously absent in that effort.
Instead, thanks to asset purchasing programs such as quantitative easing where the Bank has bought up wide swaths of corporate bonds, the institution has actually skewed its own balance sheet toward high-carbon purchases, according to the London School of Economics. Its purchases include the one thing the U.K. is rapidly disposing of as a nation: coal.
Statements to Parliament do send a market signal, but the sharpest call would be a statement in the marketplace: that the BOE will no longer purchase stocks connected with fossil fuels, starting with coal. Such a position would align the Bank with its own rhetoric, the tri-partisan policy of all major political parties in the U.K., and with investors across the globe.
Over 110 globally significant financial institutions now have a coal exclusion policy. While central banks are not the most active on this list, there is a precedent. The Banque de France enacted a coal policy in 2018 and the Dutch central bank has a policy process to establish “screening criteria” to align its portfolio with responsible investing and climate goals. Perhaps most importantly of all, the incoming president of the European Central Bank Christine Lagarde has publicly stated that Europe’s most powerful central bank should “gradually eliminate carbon assets.”
As we’ve seen time and again, when financial institutions are pushed to act on climate, coal is the first thing to go.
For some reason, that logic has not held at the institution that has so publicly raised the issue of climate risk. The Bank of England has done pioneering work to raise the profile of climate risk for central banks and regulators around the world, resulting in voluntary standards issued by the Task Force on Climate-Related Financial Disclosures. These standards were instrumental in creating the Network for Greening the Financial System which, through its members, including the European Central Bank, the Japanese FSA and the Peoples Bank of China, covers roughly 50 percent global GDP.
And, of course, the Bank of England supported the Network for Greening the Financial System’s first report, which explicitly called on central banks to “walk the talk” with their own portfolios. Still, the Bank has not done so.
It’s not as though the Bank of England doesn’t understand the problem with coal. Quite the contrary. In fact, its latest stress tests of insurers’ balance sheets clearly demonstrated that the highest transition risk in any scenario sits squarely with coal assets.
All of which raises the question — why isn’t Bank of England doing something, anything, to align its actions with national policy and limit its own exposure to coal?
It’s a question that’s going to be asked with increasing frequency over the next year as the U.K. gears up to host the next round of COP climate talks in Glasgow, which may be the first COP to run coal-free. U.K.-based financial institutions will receive increased scrutiny for their financing of coal, oil and gas — and their responsibility for worsening the climate crisis.
All of this makes now the perfect time for Bank of England to announce a clear and strong coal policy that will put the institution squarely in line with the rest of the United Kingdom.
To highlight the Bank of England’s coal problem, we (along with Father Christmas) delivered them an early Christmas present: a giant sack of goal to expose their dirty secret! See the photos and read all about the action here.