BoE transition plan aims to reduce operational emissions by 90%

The Bank of England (BoE) has announced it will slash emissions from its physical operations, according to its climate transition plan released on 6 July. Chief operating officer Ben Stimson has said the bank is one of the first in the world to publish a climate transition plan.

However, in a separate report detailing climate-related financial disclosures, the BoE admits that its sovereign asset portfolios are not aligned with the Paris climate agreement to keep global heating to less than 1.5ºC.

The climate transition plan lays out ambitions for the bank to reduce greenhouse gas emissions from its physical operations by 90% by 2040, with interim milestones to reduce emissions every five years.

The first milestone is set at a 40% reduction by 2025. The majority of the bank’s emissions come from scope 3 activities, prompting engagement with suppliers and encouraging investments in technologies to mitigate pollutants released during banknote production.

The BoE is currently reviewing its disclosures and intends to transition from the recommendations of the Task Force on Climate-related Financial Disclosures to the sustainability disclosure standards of the International Sustainability Standards Board.

The bank hopes the move will help refine future transition planning and contribute to the UK government’s net-zero emission plan. The plan covers the BoE’s own operations but not its balance sheet.

The plan is based on the draft recommendations of the UK’s Transition Plan Taskforce. The taskforce’s final disclosure framework, which aims to define the essential elements of an effective net-zero transition plan, is expected to be released in the autumn.

Stimson emphasised that, as the authority responsible for strengthening the financial system’s resilience, the BoE is committed to meeting the standards it expects from others. He also highlighted that the bank has previously established climate-related requirements, including disclosures for the banks and insurers it regulates.

Alongside the climate transition plan, the BoE also released its climate-related financial disclosure report. It shows that the bank’s sovereign asset portfolios do not align with the 1.5°C ambition of the Paris Agreement. In the last Green Central Banking Scorecard, the UK scored just 56 out of 130.

The report also shows that the weighted average carbon intensity of sovereign bond portfolios remained largely unchanged in the last year, suggesting no material change in transition risks. However, the BoE’s transition and physical risks are materially lower than those in a G7 reference portfolio.

Stimson said that a successful energy transition is “a daunting task for all of us”. Last week, the Guardian reported leaked plans to drop the UK’s £11.6bn climate and nature funding pledge, while Stimson’s speech comes four months after reports that the BoE will reduce spending on climate-related research. It is unclear whether a reduction in spending will affect the BoE’s climate transition plan.