BoE criticised for inclusion of fossil fuels in Covid-19 stimulus

April 20, 2020|Written by Camilla Schramek|Bank of England

The Bank of England’s monetary policy response to the Covid-19 pandemic has been criticised for including the bonds of fossil fuel companies in its asset purchases. 

“There is no need for our response to the coronavirus crisis to harm our response to the climate crisis,” said Fran Boait, Executive Director of campaigning group Positive Money. Boait called on the Bank to stop buying bonds from fossil fuel companies.

The Covid Corporate Financing Facility (CCFF) offers companies financing on terms similar to market rates prior to Covid-19 and is part of the BoE’s quantitative easing response to economic disruption caused by the pandemic. It is intended to double the Bank’s portfolio of corporate bonds from £10 billion to £20 billion, and almost £7.5 billion have already been purchased. Companies with eligible bonds include Royal Dutch Shell, Total and BP.

The inclusion of fossil fuel bonds in the CCFF contradicts statements by Bank governor Andrew Bailey, who told a commons committee last month that there was a “very strong argument” for excluding fossil fuel companies from the bank’s asset purchases. 

While Bailey said that considering the exclusion of these companies would be a priority for the BoE, he also warned that any exclusion of fossil fuel companies from asset purchases would require the consent of the government.

This need for government consent was repeated by a spokesperson for the Bank. “The MPC’s actions are guided by statutory objectives and a remit set by parliament and the government of the day,” she said in response to Positive Money’s criticism. “The government’s latest remit letter does not specify a climate objective.”

The failure of the Treasury to give the BoE a climate remit comes as the UK prepares to host the pivotal COP26 later this year.

This page was last updated April 23, 2021

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