International climate-related initiatives
Central Banks and Supervisors Network for Greening the Financial System (NGFS)
The Bank of England is a founding member of the Central Banks and Supervisors Network for Greening the Financial System. The Network was formed in December 2017, at the One Planet Summit in Paris. It was co-founded by eight central banks and supervisors, and, as of July 2020, has 66 members and 13 observers.
The Bank chairs the NGFS workstream looking at sizing the risks from climate change to the financial system and macroeconomy. It actively contributes to the other workstreams on supervision of climate-related risks and scaling up green finance. In January 2019, the Bank hosted an NGFS conference on ‘the macroeconomic and financial stability impacts from climate change.’
In June 2020, under the Chairmanship of the Bank, the NGFS published a first set of climate scenarios alongside a first-of-its-kind Guide to climate scenario analysis for central banks and supervisors. The NGFS scenarios have been developed to provide central banks and supervisors, as well as financial firms and companies, a common starting point for analysing climate risks under different future pathways. These scenarios will also serve as a basis for the 2021 Biennial Exploratory Scenario (BES) on climate risks. The Guide provides practical advice on using scenario analysis to assess climate risks to the economy and financial system.
Other notable publications by the NGFS include its first comprehensive report, ‘A call for action – climate change as a source of financial risk’ from April 2019. The report sets out six recommendations for central banks, supervisors, policymakers and financial institutions to enhance their role in the greening of the financial system and the managing of climate and environment-related risks. Alongside the report, Mark Carney, former Governor of the Bank of England, Francois Villeroy de Galhau, Governor of the Banque de France, and Frank Elderson, Chair of the Network for Greening the Financial System (NGFS) wrote an open letter on climate-related financial risks. More recently, they and Andrew Bailey, Governor of the Bank of England, wrote an open letter arguing that the world must seize the opportunity created by the coronavirus outbreak to meet the climate challenge.
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 financial risks, the Financial Stability Board (FSB), 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.
The TCFD’s framework is increasingly becoming the global standard for climate disclosures. The Bank used this framework for its first climate-related financial disclosure as part of its annual reporting for the financial year 2019/20, setting out the Bank’s approach to managing the risk.