London, 4 Feb 2021
Responding to comments from Andrew Bailey that suggest the Bank of England intends to ‘incentivise’ fossil fuel companies to decarbonise, rather than actively excluding them from the Bank of England’s corporate bond purchases, Fran Boait, executive director at Positive Money, said:
“It’s positive that the Bank of England is recognising that market neutrality does not make sense when the market is currently fuelling global heating of more than 3.5C. Yet the Bank still shies away from committing to the action necessary to address this.
“It’s worrying that the Bank of England seems to be ignoring the advice of MPs on the Environmental Audit Committee, who told Andrew Bailey just last week that the Bank needs to align its corporate bond purchases with 1.5C ahead of COP26. Instead of actively excluding high-carbon assets from monetary policy operations like other central banks are doing, Andrew Bailey still seems to think he can do the impossible and simply ‘incentivise’ fossil fuel companies to go green.
“If Britain is to lead the way on green finance ahead of COP26, the Treasury needs to make sure the Bank of England isn’t watering down its ambition, and is instead using all of the powerful tools at its disposal to direct finance away from fossil fuels and towards greener alternatives.”
MPC Press Conference, 4th Feb 2021 (question on decarbonising the corporate bond purchase scheme at 46:18): https://www.youtube.com/watch?
In response to a question on whether the Bank of England will decarbonise its corporate bond portfolio, Bailey said: “In setting that structure, my view is that we want to create the incentives for companies to meet the targets, to meet the adjustment targets, to meet the requirements on transparency… so we will work on constructing a certain benchmark, if you like, which has the characteristics that it meets the public interest objective on climate change and sets the right incentives for companies to meet it.”
Other central banks, such as Sweden’s Rikbanks and the Swiss National Bank, are actively excluding high-carbon assets.
“The Riksbank when purchasing corporate bonds, with effect from January 2021, shall only offer to purchase bonds issued by companies deemed to comply with international standards and norms for sustainability”. 25 November 2020, Page 5: https://www.riksbank.se/
globalassets/media/rapporter/ ppr/engelska/2020/201126/ annex-to-the-minutes-b- programme-for-the-riksbanks- asset-purchases-for-monetary- policy-purposes-in-2021.pdf
The Swiss National Bank announced in January that it will exclude coal companies from its monetary policy portfolios: https://www.snb.ch/en/mmr/
Last week the Environmental Audit Committee called for the Bank of England to align its bond purchases with 1.5C ahead of COP26: https://positivemoney.org/
2021/01/environmental-audit- committee-blasts-bank-of- england-for-high-carbon- stimulus/
A letter from 125 experts (including Yanis Varoufakis, Stephanie Kelton and William Buiter) outlined what the Bank of England should be doing to support the government’s climate targets, 16 November 2020: https://positivemoney.org/
2020/11/sunaks-green-finance- plans-come-under-fire-from- experts-press-release/ [see Guardian coverage here: https://www.theguardian.com/ business/2020/nov/16/bank-of- england-needs-more-powers-to- decarbonise-economy-say- experts]
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/
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