- Title: Bank of England to smooth way to net zero, not force it - Bailey
- Date: 1st June 2021
- Summary: LONDON, ENGLAND, UNITED KINGDOM (JUNE 1, 2021) (REUTERS) VIRTUAL SESSION IN PROGRESS (SOUNDBITE) (English) BANK OF ENGLAND GOVERNOR, ANDREW BAILEY, SAYING: "It is clear that the biggest component of the journey to net-zero rests not with central banks, but with government, through the delivery of sector-level climate policy paths - without these the real economy cannot adjust effectively. That is one element of uncertainty in climate change which is within the gift of governments to solve, and many are working hard to just that." WHITE FLASH (SOUNDBITE) (English) BANK OF ENGLAND GOVERNOR, ANDREW BAILEY, SAYING: "As the prudential regulator, any incorporation of climate change into regulatory capital requirements would need to be grounded in robust data and be designed to support safety and soundness while avoiding unintended consequences or compromising our other objectives. In my view, the case for this has yet to be clearly established and it possibly may never be. But our work to improve climate disclosures, scenario analysis, and risk management, could help unlock such assessments, which is another reason why it's so important." WHITE FLASH (SOUNDBITE) (English) BANK OF ENGLAND GOVERNOR, ANDREW BAILEY, SAYING: "Obviously with climate scenarios we are doing economic modelling over 40, 50, 60 years. And, you know, to pick the word carefully you realise how heroic it becomes." (LAUGHS) WHITE FLASH (SOUNDBITE) (English) BANK OF ENGLAND GOVERNOR, ANDREW BAILEY, SAYING: "I think unless you are Elon Musk you can't diversify away from our exposure to the planet. In that sense, climate change is the ultimate systemic risk - it's everywhere around us." WHITE FLASH (SOUNDBITE) (English) BANK OF ENGLAND GOVERNOR, ANDREW BAILEY, SAYING: "The physical effects of climate change, such as rising sea levels and more frequent severe weather events, as well as the transition to a net-zero economy, through changes in government climate policy, technology and consumer preferences, create financial risks and economic consequences. The question is not if but where, to what extent, and how should we respond to that."
- Embargoed: 15th June 2021 17:28
- Keywords: Bank of England Governor Andrew Bailey BoE British central bank Global Responsible Business 2021 conference Reuters Events climate change finance and environment monetary policy
- Location: LONDON, ENGLAND, UNITED KINGDOM
- City: LONDON, ENGLAND, UNITED KINGDOM
- Country: United Kingdom
- Topics: Climate Change,Climate Finance,Environment,Europe,General News
- Reuters ID: LVA001EFKIM4T
- Aspect Ratio: 16:9
- Story Text: Bank of England Governor Andrew Bailey said on Tuesday (June 1) the British central bank wants lenders and insurers to be more aware of the risks posed by climate change, but that it was not financial regulators' role to enforce change.
Central banks around the world are increasingly focused on the costs of climate change as they try to steer a path for their economies and the financial systems through the transition to net zero carbon emissions as well as extreme weather events.
"The biggest component of the journey to net-zero rests not with central banks, but with government, through the delivery of sector-level climate policy paths. Without these the real economy cannot adjust effectively," Bailey said in a speech to the Reuters Responsible Business 2021 conference.
Earlier this year British finance minister Rishi Sunak changed the BoE's policy mandate to require it to support a government commitment to shift to a net zero economy by 2050.
Bailey said the BoE wanted financial institutions to take better account of the risk climate change posed to their business models, but that it was too soon for the BoE to link capital requirements explicitly to environmental criteria.
Such a move would "need to be grounded in robust data" while being designed to avoid unintended consequences or compromising the BoE's other objectives, Bailey said.
"In my view, the case for this has yet to be clearly established and possibly may never be. But our work to improve climate disclosures, scenario analysis, and risk management, could help unlock such assessments," he said.
The U.S. Federal Reserve said in March it was establishing a panel focused on financial stability risks and looking into the possibility of climate stress tests for banks, something the BoE is launching this month for lenders and insurers.
However, the BoE has said its tests will not lead to any new capital requirements for financial firms, at least not for now.
(Production: Kristian Brunse) - Copyright Holder: REUTERS
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