(29 November 2021 – United Kingdom) The Bank of England (BoE) is seeking to enforce its proprietary green credentials on corporate bond purchases for the first time, enabling an investment framework that successfully avoids harmful “greenwashing”.
The move follows the European Central Bank (ECB) instructing lenders to estimate the risk they could face from climate change in both their lending and trading operations when they undergo a stress test in 2022. Banks will have to predict how their balance sheets will evolve over 30 years as well as any related losses they could face in the transition to a more sustainable economy.
The London-based reserve bank will only purchase bonds with public environmental, social, and governance (ESG) goals that meet its standards, and will apply scorecards that grade bonds by their issuers’ levels of emissions intensity. It’s a step change for the British central bank which already acquires ethical assets yet does not grade them based on the firm’s credentials.
“The ESG market, in particular the green bond one, is still young and rules are changing. Central banks are right to try to steer market in the right direction” commented Eurizon Asset Management Head of Green and Sustainable Finance, Matteo Merlin.