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COP26: Economist warns Bank of England slipping behind on climate

by LLB Reporter
29th Oct 21 11:00 am

The Bank of England is slipping behind G20 counterparts on action to green the financial system, despite the UK’s ambition to show global leadership as host of crucial climate talks next month, according to the latest Green Central Banking Scorecard published today by think tank Positive Money.

An updated COP26 edition of Green Central Banking Scorecard, which ranks G20 countries on the green policies and initiatives of their monetary and prudential authorities, has seen the UK slip from 4th to 5th place since the first edition was published in March this year, overtaken by the European Union.

Despite yesterday’s announcement that the Bank of England may be changing course on the use of capital rules to regulate climate-related risks in the financial system, researchers find that the Bank has been too slow to implement green policies, despite receiving a new mandate to do so from politicians. The UK’s central bank failed to keep up with the European Central Bank, which outlined its climate strategy earlier this year and is now moving towards stronger measures such as restrictions on banks’ portfolios, as well as climate capital rules.

Other significant changes include China’s fall from 1st to 3rd place, as a consequence of its current domestic coal financing spree, and France’s rise to fill the top spot. France’s improved score mostly results from developments at the ECB, but the Banque de France marks itself out from its European counterparts primarily due to its responsible investment charter that includes a phaseout from fossil fuel investments. However despite topping the chart, France still only receives a ‘C’ grade, reflecting the huge work remaining for central banks to align financial systems with the climate goals governments have committed to.

India jumps ahead of the US in light of the Reserve Bank of India joining the Network for Greening the Financial System and considering climate stress tests, leaving the latter in joint 14th place, tied with Canada.

The scorecard comes as the Bank of England is set to be the location of a National Climate Justice Memorial on Friday evening, where members of the public will be gathering to demand policymakers take action to ‘defund climate chaos’.

David Barmes, senior economist at Positive Money, said: “The slow progress from central banks is deeply troubling ahead of crucial climate talks where finance is supposed to be a key focus. Policymakers remain stuck in the “data-gathering” stages, when what the twin crises of climate and ecological breakdown require is rapid action.

“It is worrying to see the UK, as host of COP26, slip behind when we should be showing leadership. When you consider that the UK financial sector is responsible for more greenhouse gas emissions than the UK itself or even the whole of Germany, the Bank of England simply cannot afford to sit idle.

“As the host of COP26, the UK is uniquely placed to lead the way with ambitious, high impact policies. As regulator of our financial system, the Bank of England must use its considerable powers to bring UK finance in line with the 1.5C target the British government is committed to.”

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