{"id":48193,"date":"2020-03-04T13:19:57","date_gmt":"2020-03-04T13:19:57","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=48193"},"modified":"2020-03-04T13:20:24","modified_gmt":"2020-03-04T13:20:24","slug":"the-bank-of-england-must-lead-the-way-on-climate-change","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2020\/03\/04\/the-bank-of-england-must-lead-the-way-on-climate-change\/","title":{"rendered":"The Bank of England must lead the way on climate change"},"content":{"rendered":"
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I was one of quite a lot of people to co-sign this letter:<\/p>\n

\u201cThe Bank of England must lead the way on climate change\u201d Open letter to Andrew Bailey<\/strong><\/p>\n

London, 3 March 2020<\/strong><\/p>\n

Dear Andrew Bailey,<\/p>\n

Congratulations on your appointment as Bank of England governor. We wish you all the best in your new role.<\/p>\n

You are taking up this post at a time when the financial system faces a reckoning with the climate crisis. This decade will be a period of profound upheaval, as markets react to extreme weather events occurring with greater frequency and further interventions by governments to curb emissions. We applaud the work you have done at the PRA and FCA to advance understanding of the challenges ahead.<\/p>\n

To mitigate the worst effects of the crisis and meet the goals of the Paris Agreement, the transition to a zero-carbon economy must be urgently accelerated. Governments bear the primary responsibility for driving this shift, via regulation, taxes, subsidies and public investment.<\/p>\n

Central banks also have an essential role to play. While governments have committed to limit the global temperature rise to as near as possible to 1.5\u00b0C, the financial system \u2014 as the Bank has previously warned \u2014 is still financing emissions that will trigger runaway warming that exceeds 4\u00b0C. Unless financial flows are urgently reoriented, our efforts to address the climate crisis have no chance of success.<\/p>\n

Banks and insurers, and the financial system as a whole, face catastrophic consequences if they fail to adapt. If warming is left unchecked, extreme weather events will cause devastating losses. And if markets fail to anticipate regulation that makes future activity unviable, carbon-exposed firms and their supply chains could see a sudden and significant drop in value.<\/p>\n

Central banks\u2019 regulatory regimes and monetary policy operations can guide the reallocation of capital, so that markets are aligned with the Paris climate goals as quickly and smoothly as possible. Given the UK\u2019s position at the crossroads of global finance, the Bank of England\u2019s role is especially important.<\/p>\n

The Bank already has a strong foundation on which to build. The first stress tests on climate risk will help to identify potential shortfalls in firms\u2019 ability to withstand shocks, and force them, where necessary, to change course. The move towards comprehensive disclosures of climate risks by banks and insurance companies will make it easier for investors to assess their exposure, issuers to reprioritise their long-term investment strategies and for regulators to identify weaknesses across the system. This has been galvanised globally by the Task Force on Climate-related Financial Disclosures, and UK adoption has been encouraged by the PRA\u2019s new supervisory statement. The Bank has also pledged to disclose the climate-related financial risks across its entire balance sheet, we hope including assets purchased under its quantitative easing programme, which will set an important example to firms across the sector.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

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But due to the short time horizons of most actors and the methodological limitations inherent in quantifying climate risk, these measures alone are unlikely to be enough. This problem is outlined in the recent Bank of International Settlements and Banque de France publication, 'The Green Swan'. For as long as the financial system is aligned with a temperature rise beyond 1.5C, it is exposed to unacceptable climate-related financial risks, both from extreme weather events and the effects of future shifts in policy. For central banks to effectively discharge their duty to protect financial stability, they must use all the tools at their disposal to realign finance with internationally-agreed climate targets. With the UK hosting COP26 this year, the world is looking to you to lead the way.<\/p>\n

We believe that three specific steps would help to put the financial sector on the right path. Firstly, the Bank should work with the government to put climate-related disclosures on a mandatory footing as soon as possible, in order to provide a comprehensive picture of the financial sector\u2019s exposure. Secondly, we urge you to lead by example, and pledge to exclude fossil fuel assets from the Bank\u2019s future bond purchases and collateral framework, starting with any exposures to coal. This will send a powerful signal that holding these assets undermines long-term financial stability, and is incompatible with the Paris goals. Finally, we urge you to consider adjusting the Bank\u2019s macroprudential framework, so that the risks associated with high-carbon loans are more accurately reflected in the amount of capital banks hold against them.<\/p>\n

Given the implications of climate change and the low carbon transition for financial and price stability, the above actions clearly fall squarely within the mandate of the Bank. You can count on our support in your efforts to respond to the climate crisis, and we look forward to hearing about your plans.<\/p>\n

Yours sincerely<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

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Fran Boait, executive director, Positive Money
\nMiatta Fahnbulleh, chief executive, New Economics Foundation
\nDoug Parr, chief scientist and policy director, Greenpeace
\nUlrich Volz, director, SOAS Centre for Sustainable Finance
\nKate Levick, programme leader, E3G
\nPrashant Vaze, head of government & policy, Climate Bonds Initiative
\nNick Robins, professor in practice for sustainable finance, LSE Grantham Research Institute
\nSir David King, partner, SYSTEMIQ
\nWillem Buiter, visiting professor of international and public affairs, Columbia University
\nDr Jane Goodall DBE, founder, the Jane Goodall Institute
\nRosalyn Schofield, member, Committee on Climate Change Adaptation Committee
\nSteve Waygood, chief responsible investment officer, Aviva Investors
\nMichael Izza, chief executive, Institute of Chartered Accountants in England and Wales
\nMartin Shaw, chief executive, Association of Financial Mutuals
\nPaul Nowak, deputy general secretary, Trade Union Congress
\nYanis Varoufakis, professor of economics, University of Athens
\nZamzam Ibrahim, president, National Union of Students
\nSteven Croft, Bishop of Oxford, Church of England
\nMaggie Rae, president, Faculty of Public Health
\nAdam Tooze, director, European Institute
\nBevis Watts, chief executive, Triodos Bank UK
\nWilliam Blyth, associate fellow, Chatham House
\nJenna Hegarty, deputy director, policy and advocacy, RSPB
\nGeorgina Mace, professor of biodiversity and ecosystems, UCL
\nKeith Bell, professor of smart grids, University of Strathclyde
\nRebecca Willis, professor in practice, Lancaster Environment Centre, Lancaster University
\nJohn Barry, professor of green political economy, Queens University Belfast
\nBenjamin Sovacool, professor of energy policy, University of Surrey
\nDale Southerton, director, Cabot Institute for the Environment, University of Bristol
\nBen Caldecott, director, Oxford Sustainable Finance Programme, Oxford University
\nFr Damian Howard SJ, provincial superior, British Jesuits
\nMardi Mcbrien, managing director, Climate Disclosure Standards Board
\nPaul Simpson, chief executive officer, Carbon Disclosure Project
\nLauren Compere, managing director, Boston Common Asset Management
\nJonathan Porritt, founder & director, Forum for the Future
\nHector Politt, director, Cambridge Econometrics
\nBill McKibben, co-founder, 350.org
\nThomas Hale, associate professor of global public policy, Blavatnik School of Government, Oxford University
\nJohn Muellbauer, professor of economics, Oxford University
\nNadia Ameli, principal research fellow, UCL Institute for Sustainable Resources
\nKate Raworth, senior teaching associate, Environmental Change Institute, Oxford University
\nAshley Taylor, senior private sector advisor, Christian Aid
\nAnn Pettifor, director, Policy Research in Macroeconomics
\nJo Pike, chief executive, Scottish Wildlife Trust
\nMatthias Kroll, chief economist, World Future Council
\nPaul Gambles, managing director, MBMG Investment
\nDanny Dorling, professor of geography, Oxford University
\nJanie Oliver, executive director, Ecumenical Council for Corporate Responsibility
\nLouisa Davison, steering group, Citizens\u2019 Climate Lobby UK
\nMark Blyth, professor of international economics, Brown University
\nTim Jackson, director, Centre for Understanding of Sustainable Prosperity
\nShaun Spiers, executive director, Green Alliance
\nPeter Sweatman, chief executive, Climate Strategy & Partners
\nAlberto Botta, senior lecturer in economics, University of Greenwich
\nJason Hickel, senior lecturer, Goldsmiths, University of London
\nGerhard Kling, chair in finance, University of Aberdeen
\nRens Tilburg, director, Sustainable Finance Lab
\nAndrew Denis, fellow emeritus, Department of Economics, City, University of London
\nFelix FitzRoy, emeritus professor, School of Economics & Finance, University of St Andrews
\nPanicos Demetriades, professor of financial economics, University of Leicester
\nJonathan Michie, professor of innovation & knowledge exchange, Oxford University
\nHugues Chenet, honorary senior research fellow, Institute for Sustainable Resources, UCL
\nPhil Haynes, professor of public policy, University of Brighton
\nRick Van Der Ploeg, professor of economics, Oxford University
\nDavid Tyfield, reader in environmental innovation and sociology, Lancaster University
\nJulia Steinberger, professor of social ecology and ecological economics, University of Leeds
\nJohan Frijns, director, BankTrack
\nSteve Keen, honorary professor, UCL
\nChristine Cooper, chair in accounting, University of Edinburgh Business School
\nOzlem Onaran, professor of economics, University of Greenwich
\nIoannis Ioannou, associate professor, London Business School
\nJosh Ryan-Collins, head of research, UCL Institute for Innovation and Public Purpose
\nJacob Funk Kirkegaard, senior fellow, Peterson Institute for International Economics
\nDavid Comerford, lecturer in economics, Strathclyde Business School
\nEric Lonergan, economist
\nJeremy Leggett, founding director, Solarcentury
\nJustin Guay, director global climate strategy, The Sunrise Project
\nVictor Anderson, Global Sustainability Institute, Anglia Ruskin University
\nMaria Nikolaidi, senior lecturer in economics, University of Greenwich
\nNeil Lancastle, senior lecturer, Department of Accounting and Finance, De Montfort University
\nAnna Laycock, chief executive officer, Finance Innovation Lab
\nOliver Greenfield, convenor, Green Economy Coalition
\nYannis Dafermos, lecturer in economics, SOAS University of London
\nPaul De Grauwe, John Paulson Chair in European Political Economy, LSE
\nSophie Neuburg, executive director, Medact
\nDaniela Gabor, professor of economics and macro-finance, University of the West of England
\nMatthew Olczak, senior lecturer, Aston Business School, Aston University
\nDimitri Zenghelis, visiting research fellow, LSE Grantham Research Institute
\nJay Cullen, professor of corporate law and financial regulation, University of York
\nMolly Scott-Cato, professor of green economics, University of Roehampton
\nPeter Rice, managing director, Clearpoint Advisors
\nAndrew Jackson, research fellow, Centre for the Understanding of Sustainable Prosperity
\nDaniel Bailey, senior lecturer, Manchester Metropolitan University
\nRichard Murphy, professor of practice in international political economy, City University, London
\nPatrick Allen, chair and founder, Progressive Economy Forum
\nKjell Ku\u00cc\u02c6hne, director, Leave it in the Ground Initiative Catherine Howarth, chief executive, ShareAction
\nVictoria Chick, emeritus professor of economics, UCL
\nScott Kelly, research director, Institute for Sustainable Futures
\nNicky Bull, chair, Operation Noah
\nMark Campanale, founder & executive chair, Carbon Tracker Initiative<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

I was one of quite a lot of people to co-sign this letter: \u201cThe Bank of England must lead the way on climate change\u201d Open
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