The Bank of England must better address environmental risks to manage inflation and ensure the UK’s long-term financial stability, campaigners have said.
The central bank is being urged to take a series of actions, including developing more technical expertise on climate and nature-related risks to the economy, in a paper by wildlife charity WWF.
The report, released on Monday, outlines the negative impacts of climate change and nature loss on price stability, financial stability and growth, which it points to as the bedrocks of the UK economy and people’s living standards.
It argues that the Bank of England is falling behind other central banks in managing environmental threats and can better align with and support the transition to a net zero, nature-positive economy.
Karen Ellis, WWF’s chief economist, said: “There is so much more they could and should be doing.
“The financial sector has a huge impact on climate change, which is leading to growing economic pressures in the UK, like food price rises and making properties uninsurable due to increasing flood risk.
“As one of the most powerful bodies tasked with regulating this sector, the Bank of England’s actions matter for climate and nature, and frankly the Bank of England and their well-resourced team must do more.”
WWF is calling on the Bank to improve its analysis of the impacts of climate change and nature loss on the economy, and communicate these findings widely to policymakers, politicians and the public.
The charity said it should also align its own policymaking with an orderly transition – drawing on examples of best practice from other central banks around the world, while also developing its own innovative proposals.
Other recommendations include adapting its market operations to better align with an orderly transition and co-ordinating with government fiscal policy and industrial strategy to ensure it can more effectively respond to climate-induced supply side shocks.
It is not the first time campaigners have urged the Bank to step up action on environmental risks.
In March last year, more than 50 leading economists and campaign groups wrote a letter to governor Andrew Bailey, warning him that the Bank is slipping behind other major central banks.
It came after the Bank reduced resources towards climate change work, which Mr Bailey said was made after the Treasury changed its list of priorities for the financial services sector.
Climate change is increasingly disrupting food supplies, which in turn is driving up price inflation and the overall cost of living.
This is because the UK imports a significant amount of its fruit, vegetables, meat and fish, with extreme weather events abroad affecting supply chains.
Coffee and cocoa are among the commodities to have seen surging prices in recent years as climate conditions become increasingly volatile in areas of the world where these crops can be grown.
A Bank of England spokesperson said: “Whilst the Government is responsible for climate policy, climate risk threatening our objectives is part of the Bank’s remits, and we work to take action accordingly.”
