On 3 June 2021, the Bank of England (BoE) published a speech by its Governor, Andrew Bailey, entitled Tackling climate for real: progress and next steps.

In his speech Mr Bailey addresses three main areas of the BoE’s work: improving the understanding of climate-related financial risks across the financial system and macro-economy, developing and embedding climate risk management in the financial firms that the BoE regulates and seeking to achieve best practice through the BoE’s operations as a central bank.

Key points in the speech include:

• The Network for Greening the Financial System (NGFS) will soon publish the latest version of the climate scenarios that provide a common starting point for analysing the transition and physical impacts of climate change under varying assumptions, with the aim of providing a common reference framework for central banks and supervisors.
• The BoE’s Climate Biennial Exploratory Scenario exercise, which draws on the NGFS scenarios, will launch on 8 June 2021.
• At the BoE, the Monetary Policy Committee (MPC) recently had its first informal discussion on the macro-economics of climate change, and climate is an increasingly important part of G7 discussions between central banks and finance ministries.
• The biggest component of the journey to net-zero is the delivery of clear sector-level climate policy pathways by governments. Central banks cannot and should not try to fill any gaps in that space through their micro and macro-prudential actions – for example, they are not here to deliver carbon pricing.
• The BoE is committing to reduce emissions from its physical operations so they will be consistent with net-zero by 2050 at the latest.
• Last month the BoE set out in a Discussion Paper its proposals for ‘greening’ its Corporate Bond Purchase Scheme (CBPS). The CBPS will remain a monetary policy tool, with its overall target stock of assets set by the MPC in order to achieve its primary inflation objective. However, from Q4 this year the BoE intends to modify its approach to the composition of assets it buys, in order to take account of climate considerations.