The Bank of England (BoE) has outlined its climate-related governance, strategy, risk management and measurements in its second climate-related financial disclosure report, released yesterday. While the report shows a substantial reduction in the Bank’s own greenhouse gas emissions (largely from switching electricity suppliers), its corporate bond portfolio is still on track for 3C of global heating – double the Paris Agreement target.
The carbon footprint of the BoE’s Asset Purchase Facility’s corporate portfolio fell by 9% over the past year, the report finds, while the carbon intensity of its sovereign holdings is down slightly. The Bank’s own carbon footprint fell by an impressive 53% compared to 2019/20, largely due to the switch to a green electricity supplier, and the Bank has embedded climate change into its organisation-wide governance and risk management frameworks.
This is the first time that the BoE has used scenario analysis of the climate risks facing its financial asset portfolios. The scenarios used are consistent with those recently released by the Network for Greening the Financial System (NGFS) scenarios and draw on the latest data and modelling techniques. However the Bank warns that “While climate risk analysis for financial investments is improving rapidly, it remains in its infancy.”
UK research and campaign group Positive Money welcomed the BoE’s disclosure but questioned the reported reduction in emissions. “The Bank of England claims that the Implied Temperature Rise (ITR) of its £20bn corporate bond purchase scheme (CBPS) has fallen from 3.5C to 3C,” the group responded in a blog post, “but this is largely because of a change in methodology, rather than from any actions from the Bank.”
Senior Economist David Barmes was also critical of the BoE’s lack of action. “The Bank of England is patting itself on the back for its climate work, but has not yet implemented any policies that meaningfully support the government’s environmental objectives, as required by its new green mandate,” he said. “Our central bank… has the mandate and the tools to take decisive action now, for instance by excluding fossil fuel companies from its portfolios and penalising dirty lending across the financial system.”
Aligned with the recommendations of the Taskforce on Climate-related Financial Disclosure (TCFD), the BoE’s report supplements the climate-related financial risk disclosure in its Annual Report and Accounts 2020/21. The Bank published its first climate-related financial disclosure last year, revealing that its corporate bond portfolio was aligned with a global temperature increase of 3.5C.
This page was last updated June 18, 2021
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