UK Labour party pledges to make climate a priority for BoE

March 28, 2024|Written by Moriah Costa|Bank of England

The UK’s Labour party wants to make fighting climate change a main focus for the Bank of England (BoE), increase green investment, and make reaching net zero a core part of the UK government.

Shadow chancellor Rachel Reeves said she would reverse a decision to downgrade climate as part of the BoE’s main objectives if Labour wins the UK elections, expected to take place later this year.

“There can be no durable plan for economic stability and no sustainable plan for economic growth, that is not also a serious plan for net zero,” she said in a speech at the Bayes Business School on 19 March.

Her announcement came after the Labour party was criticised for scaling back its £28bn green investment programme, with some saying it would make it harder for the party to reach its green targets.

Reeves outlined the importance of macroeconomic policy in the climate transition, highlighting Labour plans to require financial institutions and FTSE 100 companies to publish their carbon footprints and adopt net-zero plans.

“I disagree with the current chancellor’s decision to downgrade the emphasis put on climate change in the remits for both bank committees. So the next Labour government will reverse these changes, at the first opportunity,” Reeves said.

In November, chancellor Jeremy Hunt removed climate change from his annual remit letter to the BoE’s financial policy committee. In previous years, climate change has been listed as a main priority for the central bank, when then chancellor Rishi Sunak outlined his plans to make the UK a hub for climate finance.

While climate change risk was still noted as being relevant to the BoE’s primary objective, it prompted the central bank to trim back its work on climate change.

BoE governor Andrew Bailey told a parliamentary committee in February that while the central bank would not ignore risks from climate change, it was reviewing how resources are allocated.

“The depth and breadth of what we do will be trimmed back somewhat, we’ll focus on what I call core financial stability risks,” he said.

In March, over 50 economists and civil groups wrote a letter to Bailey, calling on the central bank to reprioritise its work on climate change as “delays are no longer tenable”.

Hunt’s letter, they say, does not warrant the BoE scaling back its work on climate, as climate change falls within the central bank’s mandate and remains a core mandate for its monetary policy committee as a broader economic policy objective.

“Despite climate-related financial-risk disclosure initiatives now being widespread, the UK financial sector continues to underprice climate risks, and finance emissions and nature-destruction at a pace and scale that posits a risk to global financial and monetary stability, as well as global climate goals,” the letter states.

This page was last updated March 28, 2024

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