Climate change

Climate change, and society’s response to it, present financial risks relevant to the Bank’s objectives. The Bank of England is carrying out ongoing work to assess and respond to climate-related financial risks.

Our response to climate change

We published an article in the June 2017 edition of our Quarterly Bulletin summarising the financial risks from climate change, and our strategy for responding to them. The article outlines the two core elements of the Bank’s response, motivated by its statutory objectives. The first involves promoting safety and soundness by enhancing the PRA’s approach to supervising the financial risks from climate change. The second involves enhancing the resilience of the UK financial system by supporting an orderly market transition to a low-carbon economy.

The Governor of the Bank of England, Mark Carney, and the executive sponsor of the Bank’s work in this area, Sarah Breeden, have discussed the financial risks from climate change, and the Bank’s response in various speeches

Speeches on climate change

 

Insurance and banking supervision and climate change

The Bank’s initial focus was on the insurance sector, when the Prudential Regulation Authority (PRA) published a report on the impact of climate change on the UK insurance sector in September 2015.

PDFThe impact of climate change on the UK insurance sector

Subsequently, the Bank has completed a review of the UK banking sector, which was published in September 2018.

Transition in thinking: The impact of climate change on the UK banking sector

The report highlighted a transition in thinking is taking place across the sector from viewing climate change as Corporate Social Responsibility to a core financial and strategic risk. 

Building on the insurance and banking reviews, on Monday 15 October the PRA published a Consultation Paper on ‘Enhancing banks’ and insurers’ approaches to managing the financial risks from climate change’. The consultation period will end on 15 January 2019.

The PRA will be establishing a Climate Financial Risk Forum to build intellectual capacity and share best practice, to be co-chaired with the FCA. 

The PRA is also liaising with other UK financial regulators.

International initiatives

Central Banks and Supervisors Network for Greening the Financial System

The Bank of England is a founding member of the Central Banks and Supervisors Network for Greening the Financial System. The Network was announced in December 2017, at the One Planet Summit in Paris. It was co-founded by eight central banks and supervisors, and, as of end of September 2018, has over 20 members and observers. The Network hosted a conference in Amsterdam in April 2018 that was attended by representatives from over 30 countries and over 50 supervisory authorities. 

Sustainable Insurance Forum

The Bank also co-founded the Sustainable Insurance Forum (SIF). SIF is a global network of insurance supervisors and regulators, who are working together on sustainability challenges facing the insurance sector, including climate change.

Supporting enhanced disclosure

To allow markets to better assess, price and manage climate-related risks, the Financial Stability Board (FSB) has, at the request of G20 leaders, established the industry-led Task Force on Climate-related Financial Disclosures (TCFD). The Bank supports the TCFD, and has, for example, co-hosted a conference on scenario analysis in November 2017. 

Co-chairing the G20 SFSG

On behalf of the UK, the Bank co-chairs the G20 Sustainable Finance Study Group (SFSG, previously the Green Finance Study Group) with the People’s Bank of China. The synthesis reports for each year of research, as well as background papers and related G20 documents, can be found in the G20 SFSG repository.

Research on climate change

The Bank has engaged in several research activities on climate change. 

In May 2016, we published a Staff Working Paper on the impact of climate change on central banks. It examines the channels via which climate change and policies to mitigate it could affect a central bank’s ability to meet its monetary and financial stability objectives.

In July 2016, we held a joint workshop with the Met Office on climate risk and financial stability.

In November 2016, we held a joint conference, 'Central banking, climate change and environmental sustainability’ with the Council on Economic Policies.

In January 2018, we published a Staff Working Paper on climate change and the macro-economy. The review focused on the key theoretical and empirical modelling issues in the analysis of the macroeconomic risks deriving from climate change.

In May 2018, we published a joint article in Nature Climate Change on the climate change challenges for central banks and financial regulators. The paper presents the key controversies in the central banks and regulators’ response to climate change, and discusses potential areas for future research and policy.

Reducing our environmental impact

We are also committed to running our own operations responsibly and sustainably. Our Greener Bank programme is aimed at reducing the environmental impact of our day-to-day operations.

Corporate responsibility at the Bank

 
This page was last updated 15 October 2018
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