Expanded disclosure of climate risks in banking operations by the Bank of England

Bank of England Publishes Annual Climate-Related Financial Disclosure

The Bank of England (BoE) has published its annual climate-related financial disclosure, reaffirming its commitment to transparency, accountability, and collaboration in managing risks from climate change.

According to the BoE's report, the bank has enhanced its methodologies to measure climate financial risks in sovereign bonds and developed a toolkit to assess credit risks to financial institution counterparties. This is part of the BoE's efforts to mitigate climate-related financial risks to residential mortgage collateral, as stated in last year's disclosure.

The BoE's climate strategy reflects the remit set by the chancellor in the annual letters. However, the current governor, Andrew Bailey, has been criticised for shifting the BoE's attention away from climate and nature risk since taking over. The Financial Times reported recently that the BoE's focus on these issues has diminished compared to the time of former governor Mark Carney.

The BoE's report also includes the indexed long-term and short-term repo lending facilities in its disclosure, marking an expansion from last year. The value of the BoE's holdings of sovereign bonds could fall by over 9% in the most adverse climate scenario, according to the BoE.

Transition risks could "materially impact" the Common Equity Tier 1 ratio of counterparties but would not threaten their solvency, the BoE stated. Ellie McLaughlin, senior policy and advocacy manager at thinktank Positive Money, called for the BoE to assess and disclose the environmental impacts of the collateral it lends against.

Chancellor Rachel Reeves sent mixed messages on the centrality of the climate goal as she seeks to revive growth in the UK economy. While the Labour government has reinstated climate change as an important objective of central bank policy, Jeremy Hunt removed climate change from his remit letter in 2023.

Despite the changes in leadership and priorities, the BoE has retained the same three focus areas in its climate strategy as last year: managing climate financial risks, enhancing the bank's own resilience to climate risks, and promoting effective climate-related disclosures by financial institutions.

The BoE was considered a world leader in addressing climate change under former governor Mark Carney. As the bank continues to navigate the challenges posed by climate change, it will be interesting to see how its strategy evolves in the coming years.

This page was last updated on June 30, 2025. For more information, please refer to the BoE's annual climate-related financial disclosure.