Bank of England told to consider nature-related risks
The UK Chancellor of the Exchequer, Rachel Reeves MP, has written to the Governor of the Bank of England, Andrew Bailey.
She has updated the remit and recommendations for the Financial Policy Committee, saying that “The government’s economic policy objective is to restore broad-based and resilient growth built on strong and secure foundations. Price and financial stability are essential prerequisites to achieve this objective.” One of the elements of the Government’s strategy to achieve this objective is “supporting investment through the effective management of public finances and overseeing sustainable taxes and borrowing, to deliver long-term growth and accelerate the transition to a climate resilient, nature positive and net zero economy”.
The letter goes on to say:
“The climate and nature crisis is the greatest long-term global challenge that we face. The Committee should therefore continue to regard the risks posed by climate change, including physical and transition risks, as relevant to its primary objective. The Committee should consider how these risks could impact financial stability over the near and longer-term, including, where appropriate, through its stress testing frameworks, ensuring that risks stemming from possible and severe global climate scenarios are reflected in its analysis on climate risks and that sufficient time horizons are considered. Over the next year, the Committee should continue to consider the materiality of nature-related financial risks for its primary objective.”