Bank of England to take greater heed of climate crisis in future asset purchases

A senior Bank of England official announced today that the Bank is seeking the Treasury’s backing to incorporate climate risk into its asset purchases. Progress on climate from the Bank so far has been worryingly slow. It’s time for the Chancellor to update the Bank’s mandate to align its work with the government’s own climate commitments in the next budget.

In a speech to the Investment Association, Andrew Hauser, Executive Director for Markets at the Bank of England, said: “2% of the Bank’s Asset Purchase Facility consists of sterling corporate bonds, acquired as part of the MPC’s quantitative easing programme…the framework for the MPC’s asset purchases is determined by the Committee’s remit given to it by the Chancellor. But, subject to the Government indicating a willingness to update this remit, we will over the coming year be considering how to incorporate climate factors into decisions on the mix of financial assets, whilst still achieving our policy aims.”

Hauser’s comments come after Bank of England governor Andrew Bailey told MPs earlier in the year that he would make decarbonising the Bank’s corporate bond purchases “a priority” – while failing to make any concrete steps since then to act on this commitment. 

Fossil fuel companies still feature on the Bank’s list of eligible corporate bond purchases, with the likes of Shell and BP receiving billions in newly created public money via the Bank’s Covid corporate bailout scheme as we made clear in our July report: Where are the conditions for the billion £ bailouts. 

In June, the Bank of England’s first ever climate-related financial disclosure revealed that the projected emissions from its own corporate bond portfolio was setting us on the path to 3.5C warming by the end of the century – far and above the 2 degree goal of the Paris Agreement. 

Action must happen more urgently. With the UK’s economic outlook set to worsen in the coming months, the role of the Bank in supporting our recovery must come with a greater concern for the climate crisis we’re all facing. The first step must come from Chancellor Sunak, who by his next budget, must update the Bank’s mandate to ensure our central bank can use all tools at its disposal to support the government’s net zero strategy and make the transition to a truly green economy.