Featured Product

    BoE Seeks Views on Options for Greening Corporate Bond Purchase Scheme

    May 21, 2021

    BoE published a discussion paper that seeks feedback on the principles to guide how best to incentivize transition to net-zero carbon emissions via the Corporate Bond Purchase Scheme and the tools BoE might use to operationalize these principles. The paper describes the role of BoE as an investor in sterling corporate bonds (via the Corporate Bond Purchase Scheme), its monetary policy mandate, and the carbon footprint of its holdings. BoE is requesting feedback, on the questions raised in the discussion paper, by July 02, 2021. In this context, BoE also published a speech by Andrew Hauser, Executive Director for Markets, discussing the options for greening the Corporate Bond Purchase Scheme.

    In judging how the Corporate Bond Purchase Scheme might best support an orderly economy-wide transition to net zero, BoE proposes to follow three broad principles:

    • Incentivize companies to take decisive action to achieve net zero. BoE wants firms whose debt it might hold to change their behavior in meaningful and lasting ways that support orderly transition to net zero by 2050—not simply to minimize the current climate footprint of the portfolio. Exclusions or divestments will be part of the toolkit, but only where they incentivize that transition.
    • Lead by example, learn from others. Given the relatively small scale of the Corporate Bond Purchase Scheme, BoE will work closely with others in designing its approach, drawing on the work of relevant market-wide initiatives, seeking to influence that thinking where appropriate, and illustrating how comparable investors might approach similar challenges.
    • Ratchet up requirements over time. As data and metrics on transition pathways and firm-level emissions improve and issuers have the opportunity to develop credible net-zero strategies, approach of BoE will become progressively more demanding, with higher expectations and sharper incentives.

    To operationalize these principles and draw on engagement with those leading the development of the most advanced investor frameworks, BoE proposes to explore four key tools:

    • Portfolio targets. There are clear benefits to setting and disclosing interim targets for certain climate properties of the Corporate Bond Purchase Scheme portfolio. Available options (such as  target paths for portfolio emissions, or forward-looking temperature rise measures) present different combinations of conceptual merits and challenges. Over time, BoE will also look to purchase eligible green corporate bonds as the new sterling green gilt program catalyzes issuance.
    • Asset eligibility. Early priorities of BoE will include reinforcing the government timeline toward mandatory climate disclosures and examining the case for selectively excluding issuers involved in certain activities judged incompatible with the transition to net zero.
    • Tilting purchases. BoE will rebalance—or "tilt"—its purchases of bonds toward eligible issuers with stronger relative performance in terms of the goal of achieving net zero, aiming to take account of past and credible prospective improvements.
    • Escalation. BoE will design and implement a strategy for the Corporate Bond Purchase Scheme which features progressively more stringent requirements, and repercussions for issuers who do not meet them. Steeper tilts, removal of eligibility, or future sales of bonds could all be possible responses for issuers whose climate performance does not follow a credible net zero path.

    Over the coming months, BoE intends to evaluate the benefits and risks associated with the proposed approach in more depth, with the intent to identify and remedy any gaps. BoE will then construct a calibrated package that is consistent with the principles it has set out, is robust to uncertainties over the nature and timing of transition, and uses reliable data and metrics.


    Related Links

    Comment Due Date: July 02, 2021

    Keywords: Europe, UK, Banking, Securities, Corporate Bond Purchase Scheme, ESG, Climate Change Risk, Corporate Bonds, Sustainable Finance, BoE

    Featured Experts
    Related Articles

    EBA Publishes Final Regulatory Standards on STS Securitizations

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.

    September 20, 2022 WebPage Regulatory News

    ECB Further Reviews Costs and Benefits Associated with IReF

    The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.

    September 15, 2022 WebPage Regulatory News

    EBA Publishes Funding Plans Report, Receives EMAS Certification

    The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).

    September 15, 2022 WebPage Regulatory News

    MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures

    The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.

    September 15, 2022 WebPage Regulatory News

    BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules

    The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.

    September 15, 2022 WebPage Regulatory News

    IOSCO Welcomes Work on Sustainability-Related Corporate Reporting

    The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)

    September 15, 2022 WebPage Regulatory News

    BoE Allows One-Day Delay in Statistical Data Submissions by Banks

    The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.

    September 14, 2022 WebPage Regulatory News

    ACPR Amends Reporting Module Timelines Under EBA Framework 3.2

    The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.

    September 14, 2022 WebPage Regulatory News

    ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies

    The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)

    September 13, 2022 WebPage Regulatory News

    APRA to Modernize Prudential Architecture, Reduces Liquidity Facility

    The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.

    September 12, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8514