Bank of England officials see climate change only through the lens of risk and financial stability, according to this report from UK campaigning group Positive Money. However, by ignoring calls for assistance in raising investment for the low-carbon transition, this approach risks leaving meaningful action until it is too late.
The report also finds that an exclusively risk-based approach overlooks the importance to the climate of commercial banks’ power to create new money when they lend. It also outlines how this structural feature of the money and banking system leads to a market failure in the form of excessive credit allocation to environmentally-destructive activity.
“The Bank’s reluctance [to move beyond risk disclosure in its climate action] indicates that the major hurdle is a political one,” the report suggests. The authors call on the chancellor to alter the Bank’s mandate through the remit for its Monetary Policy Committee (MPC) and allow it to introduce climate considerations into its monetary policy asset purchases.
It concludes with a range of potential policies that the Bank could adopt to support decarbonisation of its activities. These include a review of the Bank’s monetary policy framework with respect to climate change, and the introduction of the macroeconomic impact of the climate crisis into the MPC decision-making process.
This page was last updated April 22, 2021
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