Expanded disclosure of climate risks now encompasses banking operations by the Bank of England

The Bank of England (BoE) has released its latest climate-related financial disclosure report, detailing the steps it is taking to address climate risks in its lending operations and the financial sector as a whole.

According to the report, transition risks could materially impact the Common Equity Tier 1 ratio of counterparties in the BoE's lending operations, but would not threaten their solvency. The BoE has developed a toolkit to assess credit risks to financial institution counterparties, with a focus on fossil fuel companies and sectors heavily reliant on carbon-intensive processes.

Chancellor Rachel Reeves, in her annual remit letter to the BoE's financial policy committee, reiterated that the climate and nature crisis is the greatest long-term global challenge and the risks it poses are relevant to the BoE's primary objective of maintaining financial stability.

In the report, the BoE has expanded its disclosure to include the indexed long-term and short-term repo lending facilities. The BoE's holdings of sovereign bonds could fall by over 9% in the most adverse climate scenario. The BoE has also enhanced its methodologies to measure climate financial risks in sovereign bonds.

Ellie McLaughlin, from thinktank Positive Money, has called for the BoE to assess and disclose the environmental impacts of the collateral it lends against, not just the banks it lends to. This would provide a more comprehensive understanding of the BoE's exposure to climate risks.

Sarah John, the BoE's chief operating officer, stated that the disclosure reflects the BoE's commitment to transparency, accountability, and collaboration. Under former governor Mark Carney, the BoE was considered a world leader in addressing climate change, but it slipped down the rankings in last year's edition of the Positive Money Scorecard.

However, concerns have been raised about the BoE's focus on climate and nature risks since Andrew Bailey took over as governor. Senior staff members who resigned from the BoE stated that the bank has shifted its attention away from these risks.

The BoE has created a new toolkit to assess risks to counterparties in its lending operations. In last year's disclosure, the BoE said it was taking steps to mitigate climate-related financial risks to residential mortgage collateral.

The Labour government has reinstated climate change as an important objective of central bank policy. The BoE publishes an annual climate-related financial disclosure report to keep the public informed about its efforts to address climate risks.

This page was last updated on June 30, 2025. The BoE continues to work towards a more sustainable financial system, recognising the urgent need to address climate risks and promote a just transition to a net-zero economy.

Expanded disclosure of climate risks now encompasses banking operations by the Bank of England