MPs across all political parties have jointly written to the Bank of England, warning that it is failing to appropriately support the green economy by not pivoting away from the fossil fuel industry.
In total, more than 50 MPs have signed a letter sent to the Bank’s governor Andrew Bailey. The MPs are calling for regulations to be heightened and strengthened in regards to financing fossil fuels, with more support demanded for the green economy.
Organised by campaign group Positive Money, the letter has been supported by Liberal Democrats leader Ed Davey, former pensions boss Baroness Ros Altmann, and Green Party MP Caroline Lucas.
“Finance has been identified as a COP26 priority by the UK, so we need to get our own house in order,” Lucas said. “That starts with the Bank of England setting out clear rules to penalise fossil fuel lending and encourage the essential investment in sustainable infrastructure and green jobs.”
The MPs are warning that the Bank is failing to consider the impacts that biodiversity loss and the climate crisis will have on financial stability moving forward. Indeed, the Banks’ own disclosure to climate-related issues shows that its assets are currently aligned with a pathway that is twice that of the 1.5C ambition of the Paris Agreement.
Earlier this year, the Bank of England faced scrutiny from MPs on the Environmental Audit Committee (EAC). An EAC inquiry on the green recovery from Covid-19 found that the Bank’s corporate bond purchasing was not aligned with the Paris Agreement.
This accusation came after Greenpeace and other climate campaigners accused the Bank of England of backsliding on its green finance commitments. The Bank’s Monetary Policy Report confirmed that the Bank has been offering – and will continue to offer – support packages to large companies without environmental conditions. They also make no direct reference to climate change.
The Bank of England has also released new information on the requirements of its upcoming climate stress tests, which will require large banks and insurers to measure and disclose climate-related risks.
The new guidance confirms that the stress tests will apply to 19 of the UK’s largest financial firms in the first instance, regarding the end-2020 balance sheet. These firms will be required to disclose climate-related risks to their portfolios across the axis of physical risk and transition risk, in three scenarios.