Bank of England Gets New Mandate to Drive Net-Zero Goals

17th March 2021 by Emma Goring

The Bank of England will seek to start greening its corporate bond-buying program from the end of the year after the government said it must consider the U.K.’s pledge to eliminate greenhouse gas pollution in future policy.

The central bank’s mandate will be updated to “reflect the importance of environmental sustainability and the transition to net-zero,” Chancellor of the Exchequer Rishi Sunak in his budget statement Wednesday. The BOE said it will provide more information about how it plans to adjust its corporate bond-buying program to “account for the climate impact of the issuers.”

The central bank plans to adopt the changes “by the time of our next scheduled round of reinvestment operations” in the fourth quarter, it said in a statement.

Sunak’s decision answers criticism from green campaigners over its pandemic rescue program, after research showed it’s effectively subsidizing polluting industries while claiming tackling climate change is a priority.

Last month, a panel of lawmakers wrote to BOE Governor Andrew Bailey urging him to ensure the central bank buys low-carbon bonds. They warned that the BOE was at risk of creating “moral hazard” by providing finance to companies in high carbon industries with no green strings attached.

Chris Stark, chief executive of the independent Climate Change Committee, said the tweak to the BOE’s mandate was the most significant announcement on climate change in a budget that was otherwise largely devoid of green measures. He said he expected further details to emerge in the Treasury’s upcoming net zero review.

Sunak also announced plans for a new task-force that would seek ways of boosting the market for voluntary carbon offsets. The task-force will be led by businesswoman Dame Clara Furse, a former chief executive of the London Stock Exchange Group Plc.

The new group will seek to “position the city as the global leader for voluntary high quality carbon offset markets,” Sunak said.