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Bank of England criticised for financing carbon-intensive firms

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The Bank of England has been criticised by MPs for providing finance to carbon-intensive companies without attaching environmental strings.

The Environmental Audit Committee (EAC) has written to the Bank’s governor, urging him to ensure any firms receiving Bank finance should disclose their climate-related activities.

The letter adds to the drumbeat for change in the financial sector.

The Bank said it was committed to reducing its impact on the climate.

It added it would reply to the MPs in due course.

‘Crunch point’

The MPs focus on two areas of investment: Covid emergency funding and long-term corporate bonds.

The committee says about 230 large companies are said to have been granted financial help to weather the Covid crisis.

Many of them have a high impact on the climate or the environment. The list includes BASF chemicals, British Airways, Nissan, Rolls Royce, and EasyJet.

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A pressure group, Positive Money, estimates that by June last year 56% of Covid funding had been allocated to high-carbon sectors. It wants the Bank to withdraw completely from fossil fuel firms.

The chancellor is due shortly to publish a revised remit for the Bank to align its investments with climate targets, and the UK government will be pushing the issue in the run-up to the forthcoming UN summit in Glasgow in November.

The EAC’s chairman, Philip Dunne, said: “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 coronavirus.

“It makes sense to tackle both together. (But) the Bank’s corporate bond purchases are currently aligned with a catastrophic 3.5°C temperature rise by 2100.

“We are calling on the Bank to show leadership on climate change. It has a moral responsibility to align its corporate bond purchasing programme with the goals of Paris Agreement; and it should require companies receiving millions of pounds of taxpayers’ money to publish climate-related financial disclosures.”

‘Ambitious programme’

A Bank of England spokesperson told the BBC: “We have an ambitious work programme on climate change, from the stress testing of the largest UK banks and insurers against climate-related financial risks through to working internationally with the central bank network for greening the financial system.

“Work to consider how best to take account of climate considerations in our corporate bond portfolio is already underway at the Bank.”

The EAC’s intervention comes as the Bank is considering how to implement a change in mandate that will enable it to “green” its policies. The chancellor is expected to dictate changes in his March Budget.

Financiers have been criticised for largely ignoring the seismic change being wreaked on governments due to the need to slash carbon emissions.

Positive Money said: “It’s currently unclear exactly what this will mean in practice, but groups like Positive Money are putting pressure on the Treasury and the Bank for it to at the very least translate into fossil fuel assets being excluded from bond purchases, as central banks such as the Swiss National Bank have recently announced.”

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BBC News – Science & Environment

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