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Bank of England set to unveil green bond plan

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·Senior City Correspondent, Yahoo Finance UK
·2-min read
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Environmental activists wear face masks depicting governor Andrew Bailey, during a protest to encourage green economy, outside the Bank of England in the City of London, on 6 August 2020. Photo: Toby Melville/Reuters
Environmental activists wear face masks depicting governor Andrew Bailey, during a protest to encourage green economy, outside the Bank of England in the City of London, on 6 August 2020. Photo: Toby Melville/Reuters

The Bank of England is poised to overhaul its corporate bond buying programme to make it more environmentally friendly.

Dave Ramsden, deputy governor for markets and banking, told journalists that the Bank of England would unveil plans for 'greening' the Bank's quantitative easing programme later this month. 

It comes after UK chancellor Rishi Sunak announced a change to the bank's mandate in March, requiring the Bank of England to include climate and environmental goals in monetary policy.

Read more: Bank of England told to 'put its money where its mouth is' on climate change

"We welcomed that and we’ve been working on a framework for the corporate bond purchase scheme to take account of the climate impact of the issuers of the bonds," Ramsden said on Thursday.

The Bank of England invests £20bn ($28bn) in corporate debt as part of its £895bn asset purchase facility. Threadneedle Street does not disclose what corporate bonds it buys but campaigners have long suspected it buys debt issued by polluting companies in the oil and gas sector. 

Last year, the Bank of England said its investment portfolio was set to contribute to an average global temperature increase of 3.5°C by the end of the century — well above the 2°C warming limit agreed by world leaders at the 2015 UN Paris climate summit.

Watch: Bank of England says UK to recover from Covid by end of year

Read more: Bank of England considers legal action over green bonds hoax

Ramsden promised "quite a significant update" later this month, saying the bank would publish its framework for assessing and screening "green" bonds.

"We want to then have an outreach period and a decent, a sustained outreach period, getting feedback on the calibration of the framework before we implement it in time for the next scheduled round of reinvestments for the CBPS [Corporate Bond Purchase Scheme] in Q4," he said.

Greening the Bank's bond portfolio is seen as a positive step by campaign groups but more action is sought. Pressure group Positive Money is calling for the Bank of England to force all banks to draw up net zero plans and penalise them for lending to polluting companies, among other things.

Read more: Bank of England's Bailey denies backsliding on climate crisis

Last year Positive Money ranked the Bank of England fourth out of G20 central banks for green policy but still scored Threadneedle Street D+ in its framework, highlighting the slow pace of the entire central banking system in getting to grips with the problem.

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