The Bank of England (BoE) is poised to reduce spending on climate-related research and will instead focus on “core operations such as financial stability, markets and a digital currency”.
According to a news report by Bloomberg, the decision is a result of limitations in the BoE’s budget. The minutes of several recent meetings of the BoE’s court of directors have indicated that the bank has been asked to prioritise activities and “operate under tight budgetary constraint[s].”
This news comes at the same time that the BoE released a report on climate-related risks and the regulatory capital framework. In evaluating the effects that climate change will have on banks and insurance firms and their ability to withstand those changes, the report notes that the BoE “will undertake further analysis to explore whether changes to the regulatory capital frameworks may be required”.
The analysis is due to cover how the framework relates to the central bank’s own “capabilities and forward-looking tools to judge the resilience of the financial system to climate risks” and “initiatives to enhance climate disclosures”.
It is unclear whether cuts to spending on climate research will affect the BoE’s ability to achieve these efforts.
The BoE’s climate-related activities currently involve purchasing climate-friendly bonds and disclosing the climate-related risks on its own balance sheet. The bank also develops ESG disclosures for banks and insurance companies under its supervision, and undertakes climate stress scenario exercises for the largest companies it regulates.
Climate-related activities were started under the previous governor Mark Carney, and continued by Andrew Bailey. In 2021, during his time as chancellor of the exchequer Rishi Sunak updated the BoE’s mandate to “reflect the importance of environmental sustainability and the transition to net zero”.
The UK currently ranks fifth on the Green Central Banking scorecard, with an aggregate score of 56 out of 130. A reduction in spending on climate-related areas by the BoE may threaten this ranking.
This page was last updated March 16, 2023
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