It is positive that the Bank of England is excluding coal from its purchases, under its Corporate Bond Purchase Scheme , but it raises the question of why they are not also doing the same for oil companies like Shell and BP, -who it appears will remain eligible just as long as they disclose climate risks and targets.
The exclusion of Scope 3 emissions from its assessment of companies’ emissions is also a major gap in the Bank’s current plans.
The Bank of England’s approach to oil and gas should be guided by the International Energy Agency, who call for no new fossil fuel projects beyond this year to meet net zero by 2050.
Rather than taking them on their word, the Bank should act to exclude the worst polluters now – it can still incentivise companies to change by leaving the door open for inclusion once they have transformed their business models in line with net zero.
The Bank of England still thinks it can ‘incentivise’ fossil fuel companies to change course with its relatively small holdings of corporate bonds. The Bank will have a much stronger impact in guiding markets to net zero if it leads by example, and proactively excludes from its portfolio companies deriving revenue from further expansion and exploration of fossil fuels.
The Bank must also not hesitate to use the full range of its other monetary policy operations, as well as its financial policies such as capital requirements, to play its part in keeping us within 1.5C of global warming.