Bank of England considering ‘game-changing’ brown-penalising factor for fossil fuel lending

In a letter published today, outgoing Bank of England governor Mark Carney has told the Treasury Select Committee that the central bank is “examining the case for a brown-penalising factor that introduces additional capital charges on polluting and potentially risky activities”, as called for by research and campaign groups including Positive Money.

The news comes after incoming Bank of England governor Andrew Bailey said he would make decarbonising the Bank of England’s QE programme a “priority”, in response to an open letter coordinated by Positive Money and others last week.

Welcoming Carney’s comments, David Clarke, head of policy at Positive Money, said:

“The Bank of England introducing a brown-penalising factor would be a game-changer in the battle to decarbonise our economy, as it would help stem the huge flow of cheap credit our financial system is pouring into fossil fuels.

“As Mark Carney recognises, the financial system is currently enabling projects that will take the global temperature rise north of 4C – more than double the target governments have committed to in the Paris Agreement. As the institution overseeing and underpinning our financial system, the central bank must use all of the tools at its disposal to shift finance in line with the government’s climate goals.”

Notes

1. A brown-penalising factor was one of the recommendations in an open letter coordinated by Positive Money and signed by more than 100 leading experts and civil society figures. It said: “we urge you to consider adjusting the Bank’s macroprudential framework, so that the risks associated with high-carbon loans are more accurately reflected in the amount of capital banks hold against them.” More information about the open letter can be found here: https://positivemoney.org/2020/03/andrew-bailey-announces-crucial-step-towards-climate-friendly-bank-of-england/

2. In October 2019 Mark Carney told the Treasury Select Committee that “policy is not yet consistent with stabilising temperatures below 2°” and that “if you price the capital markets, all the assets are probably … north of 4°” http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/treasury-committee/bank-of-england-financial-stability-reports/oral/106363.html

3. 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. https://positivemoney.org/ 

4. For any questions or to arrange an interview with a spokesperson please contact Simon Youel at simon.youel@positivemoney.org.uk or on 07817765517