The Bank of England was called on help to tackle climate change, by the UK lawmakers. This is by boosting the investment in green finance and by penalizing banks that finance the fossil fuel industry. The intervention by a cross-party group of 51 lawmakers comes ahead of the COP26 global climate talks, that is to be held in Glasgow, Scotland, in November. A recent expansion of the BoE’s remit to ensure it helps meet the government’s own climate goals.
In a letter to BoE Governor Andrew Bailey, the group said that he needed to do more. This is because the financial sector it regulates is underpricing climate-related risk. And for green finance, enough money was not spent. The letter added that they support the Bank operationalizing its new climate and environmental remits in a manner commensurate with the scale and urgency of the challenges that they are facing. The Bank can play an instrumental role in mobilising and steering private finance to help deliver the government’s goals, incentivising job creation and encouraging essential investments in green infrastructure. The group said that the BoE could bolster green lending by providing cheaper credit to banks.
Measures to ensure the higher risk of the lending to the fossil fuel sector is reflected in regulation. The push for the financial system globally, is to be aligned with climate goals. BoE Deputy Governor Sam Woods said that there is no evidence yet to force banks to hold more capital to cover risks from climate change. Protests were already faced by the banks, over their financing of polluting industries such as mining. The BoE to penalise the flow of finance towards carbon-heavy industry, would be an over-reaction. The BoE is conducting its first climate-related stress test of the main firms it regulates. The outcome will not have a direct impact on capital requirements.