Member News

March 5, 2020

MBMG Investment Advisory MBMG actively supports effo rts to encourage new Bank of England Governor to lead on climate threats

Paul Gambles, director of Bangkok-based Investment Advisory practice, MBMG Investment Advisory, joined 100 other economists, scientists and industry leaders to call on incoming Bank of England governor, Andrew Bailey, to introduce mandatory disclosure, decarbonise monetary policy and penalise high-carbon lending

101 leading figures from across finance, civil society and academia have signed a letter addressed to incoming Bank of England governor Andrew Bailey, calling on him to accelerate efforts to green Britain’s financial system.

The letter, co-ordinated by research and campaign groups Positive Money, the New Economics Foundation, Greenpeace, the SOAS Centre for Sustainable Finance and E3G, warns that measures taken by the Bank of England “are unlikely to be enough” to help the government meet its climate targets.

Outgoing Bank of England governor Mark Carney has cautioned that the financial system is currently funding an increase in global temperatures of more than 4C.[2] Signatories therefore urge Bailey, who will take over from Carney on 16 March, to use his position as head of Britain’s central bank “to lead the way” in aligning finance with the 1.5C target aimed for in the Paris Agreement ahead of this year’s COP26 summit in Glasgow.

The letter calls on Bailey to take three specific steps towards this:

● Making it mandatory for firms to disclose climate risk “as soon possible”
● Excluding fossil fuel assets from both future rounds of quantitative easing (QE) and the assets the Bank accepts as collateral, so as to “lead by example”
● Considering changes to the Bank’s macroprudential framework which would see high-carbon lending penalised

MBMG will today issue a ‘Market Flash’ to notify clients of its support for this campaign and a copy of the latter sent to Andrew Bailey will be available this afternoon.

As well as Paul Gambles, the 101 signatories include the former UK government chief scientific advisor Sir David King, former Bank of England Monetary Policy Committee member Willem Buiter and well-known primatologist Jane Goodall, as well as three members of the UK’s influential Committee on Climate Change (CCC) and four expert advisers to the UK’s citizen Climate Assembly.

As chief regulator of the UK’s financial system, the Bank of England plays a key role in facilitating the huge re-allocation of capital required to meet the climate targets governments have signed up to through the Paris Agreement. Under Mark Carney the Bank has begun to recognise the severity of the threat climate change poses to its responsibilities for economic and financial stability, warning that up to $20tn could be lost from stranded carbon assets. However, there are fears that the momentum needed to decarbonise the financial system may not be kept up by his successor. The letter comes ahead of Bailey’s pre-appointment hearing in front of the Treasury Select Committee on Wednesday, which will be an opportunity for MPs to grill him on his suitability and plans for governing Britain’s central bank.

Paul Gambles, director of MBMG Investment Advisory, said:
“Actions taken today in financial markets will have a major influence in whether the increases global temperature can be contained below the 1.5C upper limit, that is seen as the maximum that the planet can safely sustain. Current projections are that capital markets and the finance sector are enabling warming of more than 4C, which, as Positive Money’s Fran Boait has pointed out, represents an existential threat not only to finance and the economy, but to life on earth. What’s more, as Frank van Lerven of the New Economics Foundation has pointed out, the climate threat not only threatens the global financial system but is not adequately reflected as a risk in financial valuations. This affects everyone, in Bangkok, in Thailand, in Asia and beyond. It threatens financial stability, economic sustainability, national security and geopolitical stability. It’s vital that the Bank of England acts before it’s too late. Here in Thailand, we’d also like to see similar actions from institutions and policymakers.”

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