Bank of England toughens up green rules on corporate bond purchases
Central bank will no longer buy bonds from companies which make money from coal mining, BofE Governor Andrew Bailey announces
The Bank of England has announced that it will no longer buy bonds from companies that make money from coal mining as firms will be required to satisfy “climate-related eligibility criteria” to be purchased.
Issuers with any coal mining activities are ineligible. Issuers using thermal coal in their activities are also ineligible unless they meet stringent criteria related to: eliminating existing activity in line with science-based pathways; reducing emissions over time; and renewable energy provision.
The extent to which purchases are tilted either towards or away from a given firm will depend upon the strength of its climate performance, assessed against four metrics: the emission intensity of its activities; its progress to date in reducing emissions; having published a climate disclosure; and having an emissions reduction target, with more credit if this is third party verified.
BoE Governor Andrew Bailey said: “Our strategy in greening the CBPS [Corporate Bond Purchase Scheme] is to help incentivise firms to put in place and adhere to credible plans for reducing their emissions.
“Incentivising change is more powerful than immediate divestment to encourage the significant shifts in behaviour required across the economy in order to achieve net zero by 2050.
“We hope that being transparent about our approach will encourage and enable other investors to further develop strategies to green their portfolios.”
This article originally appeared at Investment Week.
