The Bank of England (BOE) is cutting funding for climate change initiatives championed by Canadian economist and central banker, now UN special envoy on climate, Mark Carney.
While serving as the Bank's governor from 2013 to 2020, Carney led several sustainability efforts, including climate change insurance risks and Environmental, Social and Governance (ESG) scores. However, the BOE is redirecting money from these initiatives to focus on its "core functions" amid rising inflation.
Non-executive members of the BOE's governing board said it "seemed clear that efficiencies and increasing productivity gains would need to be considered" given the pressures on its finances.
"Governors said they had sought to de-prioritize some work streams in recent years, but the bank's statutory obligations had to be met."
Net Zero Watch welcomed the shift, claiming it's long overdue.
"Its obsession with climate change, promoted and pushed through by its former governor, Mark Carney, in tandem with government ministers, has distracted it from its main responsibilities for years. Instead, it has been enforcing ESG disclosure guidelines, carbon-testing balance sheets and promoting Net Zero policies," writes Net Zero Watch.
The BOE's climate work currently focuses on building ESG disclosure guidelines, preparing insurers for risks from rising global temperatures and getting banks to carbon-test their balance sheets.
However, calls for the current governor, Andrew Bailey, to focus on controlling inflation and identifying potential threats to financial markets represent a sharp departure from Carney's tenure with the BOE.
Inflation has rocketed to more than five times the BOE's 2% target, prompting accusations from lawmakers that Bailey moved too slowly on the issue.
Carney put climate-related risks to the economy at the heart of the BOE's financial stability mandate, ordering stress tests on commercial lenders to ensure they were considering the long-term impact of rising global temperatures.
"During his time as Governor, Net Zero Watch criticized Mr. Carney repeatedly, warning that his climate activism and intimidation of financial institutions and pension funds into costly Net Zero targets would eventually lead to policy failure and a distressed correction. This correction appears to have now begun," wrote Net Zero Watch.
Net Zero Watch director Benny Peiser urged the Bank to abandon further "green virtue-signalling" and focus on the country's financial system.
"Unless the Bank of England abandons its fixation with green virtue-signalling, it is only storing up more problems for the economy and the UK's financial system," said Peiser.
BOE officials led by Carney have been among the most vocal in speaking about the global economy's climate-related risks in the coming decades. They helped build the Network for Greening the Financial System, a group of almost all the world's top central banks coordinating best practices on oversight.
Despite the downgrading, the Bank of England has said it will continue to study how to tackle environmental concerns best.
The Bank issued a report discussing the need for a long-term policy on climate change.
"Existing capability and regime gaps create uncertainty over whether banks and insurers are sufficiently capitalized for future climate-related losses," wrote the Bank.
Climate programs will slip lower on the central Bank's agenda so officials can focus more on the core operations such as financial stability, markets and a digital currency. However, it will remain one of the BOE's seven strategic priorities until next year.