MPs urge Bank of England to align corporate bonds with goals of the Paris Agreement.

The Environmental Audit Committee (EAC) has written to the Bank of England to urge it to demonstrate continued leadership on climate change.

The Environmental Audit Committee (EAC) has written to Andrew Bailey, Governor of the Bank of England to urge the Bank to demonstrate continued leadership on climate change, and ensure that the Bank’s corporate bond purchasing programme is aligned with the Paris Agreement goals as a matter of urgency.

“We are at a crunch point not only to mitigate the effects of climate change, but to rescue vast swathes of the economy from the impacts of successive lockdowns due to coronavirus.”

Currently, The Bank of England’s corporate bond purchases are aligned with a “catastrophic”  3.5°C temperature rise by 2021, exceeding the Paris Agreement goal of limiting global warming to 1.5 degrees celsius.

Aligning the corporate bond purchases with the Paris Agreement goals should be done before COP26, say the EAC, to prevent the UK’s diplomatic leadership on climate change being undermined.

While the Bank has been congratulated by EAC’s Chairman, Rt Hon Philip Dunne MP for becoming the first central bank in the world to publish its own climate-related disclosures, he also said the Bank is “at risk of creating a moral hazard by purchasing high-carbon bonds and providing finance to companies in high-carbon sectors without placing any condition on them to make a transition to net zero.”

The EAC emphasise that the Bank’s future actions that promote the economic recovery from COVID-19, need to also reduce the UK’s exposure to climate risk. Suggesting it has a “moral responsibility” to align stimulus with the Paris Agreement goals, it should also “require companies receiving millions of pounds of taxpayers’ money to publish climate-related financial disclosures.”

See full letter from EAC here.

25 January 2021

Climate Action