The Bank of England must do more to ensure a green recovery from the Covid-19 crisis, as current emergency finance measures have not carried conditions relating to greenhouse gas emissions, an influential committee of MPs has said.
The environmental audit committee has written to Andrew Bailey, the governor of the Bank of England, urging him to force large companies receiving millions of pounds in taxpayer money to publish information on their exposure to climate-related risks. Such disclosures are not yet mandatory but have been recommended by the former Bank governor Mark Carney.
The MPs also want him to change the Bank’s £20bn programme of buying corporate bonds, which helps to stabilise companies affected by the coronavirus crisis, to stop propping up fossil fuels and companies with high carbon emissions.
The letter warned the Bank was “at risk of creating a moral hazard by purchasing high-carbon bonds and providing finance to companies in high-carbon sectors without placing any conditions on them to make a transition to net zero”.
Philip Dunne, the chairman of the committee, called on the bank to combine the rescue from the current crisis, and the need to forge a new path to net zero emissions, by “resetting” the UK economy. He warned that failure to do so would “undermine” the UK’s preparations to host the next crunch UN summit on the climate, called Cop26 and to be held in Glasgow this November.
He said the Bank had so far failed to achieve a green recovery. “The Bank’s corporate bond purchases are currently aligned with a catastrophic 3.5C temperature rise by 2100, far exceeding the Paris agreement goal of limiting global warming to 1.5C,” Dunne said.
“We are calling on the Bank to show leadership once again on climate change, in the year the UK hosts Cop26, by ensuring its actions to promote recovery also reduce the UK’s exposure to climate change risk … It has a moral responsibility to align its corporate bond purchasing programme with the goals of the Paris agreement.”
A spokesperson for the Bank said a full response to the letter would be issued in due course, and that the Covid corporate financing facility had closed to new applications on 31 December, and would close to new borrowing in March.
“Climate change is a strategic priority for the Bank. We have an ambitious work programme on climate change, [including] the stress testing of the largest UK banks and insurers against climate-related financial risks … Work to consider how best to take account of climate considerations in our corporate bond portfolio is already under way,” the spokesperson said.
The environmental audit committee is conducting an inquiry on “Greening the post-Covid recovery”, to be published soon. Campaigners have been urging the government and the Bank of England to do more to ensure a green recovery from the coronavirus crisis, warning that a failure to do so would put the UK’s target of net zero emissions out of reach.
Fossil fuel companies and high emitters such as airlines and carmakers have received tens of billions in taxpayer-funded assistance through the Bank of England, as the coronavirus led to shutdowns of swathes of their businesses.
The Guardian asked for reassurances last year that the Bank would begin to attach “green strings” to such assistance, such as conditions on disclosing and reducing emissions, and was told moves were in train. However, there has been little change since then and the onus is now on the chancellor of the exchequer at the next budget in March to take action.
Fran Boait, an executive director of the campaign group Positive Money, said: “As the public institution overseeing and underpinning our financial system, the actions of our central bank have a key role to play in ensuring a green Covid recovery. The chancellor [of the exchequer] needs to make it clear to the Bank of England that its market-shaping policies must support rather than hinder the government’s climate targets.”
She said that as a first step the Bank should stop supporting fossil fuels and bring the rest of its portfolio into line with the Paris agreement.
“Without bold action from the Treasury and the Bank of England, the UK risks falling behind other countries, and the entire world risks falling further away from a safer future,” she said.
Jamie Sawyer, a climate finance lawyer at the campaigning group ClientEarth, said: “The government should impose additional legally enforceable conditions for bailouts and other forms of public support, including a requirement for companies to achieve net zero emissions by 2050.
“Companies should not be receiving public funds without clear climate conditions attached, and the government should be more transparent about what conditions, if any, have been attached to loans and support to date.”
Analysis by the Guardian in November found that the prospects for a global green recovery were faltering, as countries were pouring money into high-emitting sectors of the economy, many of which were hard hit by lockdowns and the global recession. However, if Joe Biden as president of the world’s biggest economy, manages to fulfil his promises of a green stimulus, that could make a global difference.