BoE adds climate conditions to energy bailouts

October 20, 2022|Written by |Bank of England

UK energy firms facing liquidity problems will be required to provide climate-related financial information in order to receive emergency financing through a joint initiative from the Bank of England and the Treasury. Firms participating in the new energy markets financing scheme must make disclosures in line with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) and must also reveal whether they have a net-zero transition plan in place.

Announced in September, details of the new facility were released on Monday. The scheme is intended to support viable energy firms with major operations in the UK from price volatility triggered by the Russian invasion of Ukraine. Approved firms can apply for 100% guarantees to secure commercial financing in order to meet margin calls.

Three environmental conditions are required under the scheme. Participating firms must disclose whether they have a net-zero transition plan and, if so, provide that plan to the Treasury. They must also make full TCFD-aligned disclosures, including details on how they will approach the transition away from carbon and how they intend to meet the requirements. If the borrower is part of a larger consolidated group, a disclosure from the parent company may also be required.

The climate criteria are part of a range of conditions, including requirements on the use of funds, capital distribution and pay restraint.

Fran Boait, executive director of research and campaign group Positive Money, welcomed the move while calling for further action. “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,” she said.

“Now that policymakers have proved they can be more active in steering fossil-dependent energy companies, they should commit to establishing a financing facility to explicitly drive the UK’s transition towards clean energy. A clean energy financing scheme could provide cheap finance to firms to invest in renewables, energy storage and grid capacity.”

This page was last updated October 20, 2022

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