October 27, 2022
After another week of chaos in British politics, and with the cost of living scandal deepening, it can be hard to feel hopeful. But campaigning is making a difference. Here are 5 bits of good news you might have missed last week in the fight for a greener, fairer financial system.
1. Finance CEOs told to step up on climate
The Bank of England wrote to finance bosses on Friday to let them know that it is prepared to use its ‘wider supervisory toolkit’ if firms don’t step up on tackling climate risks.
⚡️NEW: The @BankofEngland has written to finance CEOs warning that they need to show “further progress” on climate.
But financial firms won't stop funding reckless oil & gas expansion while it's profitable.
We need rules to stop them.
— Positive Money (@PositiveMoneyUK) October 21, 2022
The Bank has been actively keeping an eye on firms’ activities on climate for the first time in 2022, and has now warned that they must demonstrate “further progress” on managing risks.
This is positive because we know we can’t leave banks to decarbonise of their own accord. Instead of voluntary pledges, we need the Bank to take an active role in shifting financial flows away from fossil fuels and towards green alternatives.
2. Lloyds stops directly financing new oil and gas
Lloyds became the first UK bank to commit to stop directly financing the development of new oil and gas fields. Groups like Shareaction and Make My Money Matter, as well as many brave grassroots campaign groups, have worked tirelessly to make this happen, and it’s great to see it paying off.
This new rule only applies to asset-level financing, which is only a fraction of the financing provided by banks to top oil and gas expanders – around 8% according to ShareAction. But it shows that banks respond to public pressure, and sets an important precedent for other banks, especially the bigger British fossil fuel financiers like HSBC and Barclays. And it shows that we need proper regulation to cut off the money pipeline to fossil fuels across the whole financial system.
🚨 BREAKING – @LloydsBank becomes the first UK bank to commit to not directly finance the development of new oil & gas fields
A (short) THREAD 🧵https://t.co/izW6HWDpIi
— Jeanne Martin (@JeanneMartin25) October 20, 2022
3. Bank of England ‘climate and capital’ conference
The Bank of England held its first ever conference on ‘Climate and Capital’, bringing academics, policymakers and finance professionals to Threadneedle Street over two days.
The Bank’s Deputy Governor for Prudential Regulation, Sam Woods, kicked off the gathering with a big question looming large over central bankers: whether the rules about how much capital banks have to hold against different kinds of lending (known as capital requirements) are strong enough to protect the economy from the risks arising from climate change. Woods said the Bank has a “completely open mind” on this and committed to publishing updated thinking following the conference.
Although there were many arguments presented on the use of capital frameworks, there was broad agreement on one point: climate risks are different from other financial risks because they involve unprecedented levels of uncertainty.
This poll stands out from last week's @BankofEngland 'climate and capital' conference
Broad agreement that climate risks involve fundamentally different kinds of uncertainty to other financial risks
Central banks need to take precautionary action pic.twitter.com/iUklZxoEWv
— Anna Pick (@annapick_) October 26, 2022
This is an important win for those of us calling for a ‘precautionary approach’ to managing climate risks. As Frank van Lerven, Senior Economist at the New Economics Foundation, argued at the Conference, given the ‘unknown unknowns’ of the climate transition, “there is a limit to how much data we can gather until we have to start taking transformative action”.
That’s why we joined economists and campaigners in writing to the Bank alongside the conference calling for changes to capital rules to break the finance-climate ‘doom loop’ in which financial activities fuel the climate crisis and in turn increase risks to the financial system itself.
4. HSBC ads banned for greenwashing
— Adfree Cities (@adfreecities) October 19, 2022
The ASA (the UK ad regulator) said that HSBC’s ads misled consumers by promoting its green initiatives but omitting information about its contribution to global emissions, like the billions it lends to fossil fuel companies each year.
Veronica Wignall, a director at AdFree Cities, said ‘it’s painfully ironic that HSBC was warning staff about greenwashing risks the day before its own adverts are banned by the advertising regulator for greenwashing’.
5. Environmental conditions attached to bailout fund
The Bank of England & Treasury published details of their Energy Markets Financing Scheme, a bailout fund for energy firms. As we recommended the week before, firms benefiting from this fund will not be able to use public funds to enrich shareholders through share buybacks or dividend payouts, and will be required to publish plans for how they will reach net zero.
We’ve been calling for conditions to be attached to bailout schemes since the Covid Corporate Financing Facility (launched March 2020) which provided over £38 billion of cheap funds to 100 big corporations, without any conditions on protecting jobs or the environment.
It’s really positive to see that the Bank of England and Treasury have learned the lessons of these previous schemes and are finally getting serious about imposing conditions on companies accessing public funds.
“It’s good to see that the Bank of England and Treasury have learned the lessons of previous corporate bailout schemes and are finally getting serious about imposing conditions on companies accessing public funds.”
— Positive Money (@PositiveMoneyUK) October 18, 2022
It’s great to see the UK ad regulator and the Bank of England ramping up their expectations of banks and other financial firms. This is the decisive decade for climate action and we can’t wait for the sector to move of its own accord. We need our public institutions to each play their part.
These stories get easily buried under the chaos of British politics so it’s important to step back and celebrate the difference that the movement to end fossil fuel financing is making.
There’s lots left to do – sign up for updates to get involved.
Anna Pick is Senior Policy Officer at Positive Money.