Bank of England testing climate objectives
  • Wednesday, 13 November 2019

Bank of England testing climate objectives

Regulators require financial institutions to work on climate change risk and the EU Technical Expert Group on Sustainable Finance (TEG) issues final report on EU climate benchmarks. On September 10, Mark Carney (Governor of the Bank of England) stated that the Bank of England will be the first regulator to stress test its financial system against different climate pathways, including the catastrophic business-as-usual scenario and the ideal – but still challenging – transition to net zero by 2050 consistent with the UK’s legislated objective”.

The aim of this stress test is to make the financial system more responsive to changes in climate and to the government’s climate policies. In The Netherlands, DNB (Dutch National Bank) focuses on climate-related risks: they are starting to integrate climate-related risks into their financial supervision practices by requiring financial institutions to identify and mitigate these risks in their own businesses. To provide guidance on integrating these risks and explain their expectations, DNB will publish ‘Good Practice’ documents based on observed market practices for both the banking and insurance sector on short notice.

Finally, the Technical Expert Group on Sustainable Finance (TEG) issued its final report on climate benchmarks on 30 September. The report outlines the minimum technical standards for the construction of EU Climate benchmarks. These benchmarks should support investors to make well informed decisions when adopting a climate-conscious investment strategy. It is also aiming to enhance comparability of climate benchmark methodologies.