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MPs call for penalties on banks that finance the fossil fuel industry

Paula John
Written By:
Paula John

The cross-party group wants to boost investment in green finance in a bid to tackle climate change

A group of cross-party MPs have called on the Bank of England to tackle climate change by boosting investment in green finance and penalising banks that finance the fossil fuel industry, according to Reuters.

51 MPs – including Caroline Lucas and John McDonnell – have signed a letter to the Governor of the Bank of England, Andrew Bailey, urging him to do more to boost spending on green finance.

The intervention comes before November’s COP26 global climate in Glasgow and following the change earlier this year to the Bank of England’s remit to support the transition to a net zero economy.

As reported by Reuters, the letter said: “We support the Bank operationalising its new climate and environmental remits in a manner commensurate with the scale and urgency of the challenges we are facing.

“With the right policy decisions, the Bank can play an instrumental role in mobilising and steering private finance to help deliver the government’s goals, incentivising job creation and encouraging essential investments in green infrastructure.”

What can the Bank of England do?

The MPs said the BoE could ‘unleash green investment’ by providing cheaper credit to banks on the condition they lend more on sustainable projects, including those run by small and medium-sized businesses.

And they said the Bank could make sure it regulates private finance to support the government’s climate goals and reflect the higher risk of lending to the fossil fuel sector.

BoE Deputy Governor Sam Woods said in July there is no evidence yet to force banks to hold more capital to cover risks from climate change.

However, the Bank is stress testing how banks and insurers would cope with meeting the UK’s net zero climate goals, but it said the results won’t affect capital requirements.