Coal Is Out, Net Zero Now the Goal in BOE’s Greener Bond Buying
Coal Is Out, Net Zero Now the Goal in BOE’s Greener Bond Buying
(Bloomberg) -- The Bank of England will be buying more bonds from sustainable firms and ditching polluters under a plan for the “greening” of its corporate bond portfolio announced Friday.
The central bank will require more climate-related disclosures, as well as emission-reduction targets from energy and utility companies, to ensure eligibility for further bond purchases. Coal mining would render a borrower’s bonds ineligible in most cases.
In addition, bond buying will be skewed toward the stronger climate performers with the potential for further escalation, such as removal from the eligibility list of laggards and even the sale of bonds the bank already holds.
“We hope that being transparent about our approach will encourage and enable other investors to further develop strategies to green their portfolios,” Bank of England governor Andrew Bailey said in a statement.
The changes will take effect as the bank reinvests proceeds from matured bonds to push corporate QE from 19.45 billion pounds ($26.1 billion) currently to its target of 20 billion pounds. Purchases will begin on Nov. 24.
The goal is to reduce carbon intensity in the corporate portfolio by 25% by 2025 and reach net zero by 2050, with the bank flagging that it does not “yet know for how long the CBPS will exist.”
The Bank of England signaled its intention to align corporate QE with environmental goals earlier this year as part of a broader effort to push financial services toward greener finance. It initiated its corporate bond purchases in 2016, shortly after the Brexit referendum.
Ethical debt sales have reached a record 26% of marketwide syndicated primary issuance in Europe this year, according to data compiled by Bloomberg.
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