'Green Monetary Policy' BOE to Increase Purchases of Green Corporate Bonds

Andrew Bailey, BOE Governor
Photo by Reuters Yonhap News

[Asia Economy Reporter Byunghee Park] The Bank of England (BOE) announced on the 3rd (local time) that it will revise its corporate bond holding regulations to increase holdings of bonds issued by eco-friendly companies. This signifies its intention to actively participate in the government's carbon zero policy.

According to major foreign media, Rishi Sunak, the UK Chancellor of the Exchequer, revealed the government budget plan on the same day and expressed a strong commitment to advancing the carbon zero policy.

The UK will host the United Nations Climate Change Conference of the Parties (COP26) as the chair country this coming November. Accordingly, it is accelerating efforts to promote eco-friendly policies.

Chancellor Sunak stated, "The government's eco-friendly policy goal to achieve net zero greenhouse gas emissions by 2050 must be clearly reflected as part of monetary policy."

Separately, Sunak sent a letter to Andrew Bailey, Governor of the BOE, emphasizing that "the government's net zero greenhouse gas policy implies systemic changes across all sectors of the economy" and that "the financial system must also support the transition to a net zero greenhouse gas economy."

In response, the BOE announced it will change its policy on corporate bond purchases to increase acquisitions of bonds from companies that can respond to climate change. The BOE plans to disclose the revised corporate bond purchase policy in the fourth quarter of this year.

Philip Dunne, Chair of the UK House of Commons Environmental Audit Committee, said in January, "Ahead of the Conference of the Parties this November, the BOE must prepare measures to reduce corporate bonds related to greenhouse gases." Dunne expressed satisfaction with the BOE's announcement to increase purchases of green corporate bonds and revise related regulations.

The BOE also plans to conduct its first climate change-related capital adequacy stress tests on banks this year. The UK government intends to introduce new regulations regarding the disclosure of climate-related corporate bonds.

Karen Ward, Chief Investment Strategist at JP Morgan Asset Management, said that this represents a permanent change in the BOE's asset holdings and that investors should not take the BOE's policy change lightly.

This content was produced with the assistance of AI translation services.