The Bank of England has vowed to invest in green corporate bonds as they become available.
Speaking at Bloomberg, Andrew Hauser, executive director, markets, said that the bank will not immediately sell off bonds issued by businesses that have high carbon emissions but will invest in green corporate bonds as they become available, with the issuers of these bonds publishing their emissions to become eligible.
“Divestment is a powerful tool and should remain squarely in the toolkit,” he said.
“But it should be used as a credible threat to reinforce incentives, not an indiscriminate ‘quick fix’.
“We want to set challenging incentives to support transition. But jumping straight to the end state today, when data remain partial and firms are still developing credible emissions-reduction plans, is neither feasible nor productive.
“Setting a target for the overall climate properties of the portfolio will help shape and steer our investment decisions and provide transparency and accountability.
“At first sight, the framing of this target seems obvious: to achieve net zero by 2050. But 2050 is well beyond the likely lifespan of the Corporate Bond Purchase Scheme. And ‘achieve net zero’ does not tell our staff which bonds to trade. So, we need a nearer-term, intermediate, goal – in measurable units.”
Hauser said the market for sterling green bonds is currently small but the planned launch of a new green gilt issuance programme, which was outlined in the Chancellor’s Budget in March, should catalyse new corporate issuance, broadening the range of instruments available to investors.