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LONDON, June 1 (Reuters) - Bank of England Governor Andrew Bailey said on Tuesday the British central bank wants lenders and insurers to be more aware of the risks posed by climate change, but that it was not financial regulators’ role to enforce change.
Central banks around the world are increasingly focused on the costs of climate change as they try to steer a path for their economies and the financial systems through the transition to net zero carbon emissions as well as extreme weather events.
“The biggest component of the journey to net-zero rests not with central banks, but with government, through the delivery of sector-level climate policy pathways. Without these the real economy cannot adjust effectively,” Bailey said in a speech to the Reuters Responsible Business 2021 conference.
Earlier this year British finance minister Rishi Sunak changed the BoE’s policy mandate to require it to support a government commitment to shift to a net zero economy by 2050.
Bailey said the BoE wanted financial institutions to take better account of the risk climate change posed to their business models, but that it was too soon for the BoE to link capital requirements explicitly to environmental criteria.
Such a move would “need to be grounded in robust data” while being designed to avoid unintended consequences or compromising the BoE’s other objectives, Bailey said.
“In my view, the case for this has yet to be clearly established and possibly may never be. But our work to improve climate disclosures, scenario analysis, and risk management, could help unlock such assessments,” he said.
The U.S. Federal Reserve said in March it was establishing a panel focused on financial stability risks and looking into the possibility of climate stress tests for banks, something the BoE is launching this month for lenders and insurers.
However, the BoE has said its tests will not lead to any new capital requirements for financial firms, at least not for now. (Reporting by William Schomberg and David Milliken, editing by Andy Bruce)
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REUTERS EVENTS-UPDATE 1-Bank of England to smooth way to net zero, not force it - Bailey - Reuters
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