Asked by: Baroness Drake (Labour - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government when they anticipate the Bank of England will publish the results of its second climate biennial exploratory scenarios, the first having been published in May 2022.
Answered by Baroness Vere of Norbiton - Parliamentary Secretary (HM Treasury)
The Government welcomes the results of the Bank’s Climate Biennial Exploratory Scenario (CBES), which has been an important milestone in assessing UK system-wide exposures and boosting firms’ capabilities to assess climate-related risk.
Following publication of the CBES results in 2022[1], a Prudential Regulation Authority letter to CEOs[2] set out feedback on how to enhance scenario analysis and further embed supervisory expectations. In recognition that this feedback will take time to embed, the Bank has publicly stated that it will not launch a concurrent exercise in the near-term that further explores climate risks.
The Bank also affirmed in its 2023 report on climate-related risks and the regulatory capital frameworks[3] that it will further develop its capabilities to test the resilience of the financial system to climate risks- including how scenario exercises and stress tests can help the Bank and firms understand the exposure of the financial system to risks and progress work to understand material regime gaps in the capital frameworks. Further, the Bank continues to support the development of climate scenarios as a member of the NGFS’s dedicated “Scenario Design and Analysis” Workstream.
The Bank of England has statutory responsibilities for monetary policy and financial stability, and operational independence from the Government to carry out those objectives.
[1] CBES results
[2] Prudential Regulation Authority letter to CEOs
[3] 2023 report on climate-related risks and the regulatory capital frameworks
Asked by: Baroness Drake (Labour - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what assessment they have made of the role of the financial sector, including the pension sector, in decarbonising the UK economy while safeguarding investors' interests.
Answered by Baroness Vere of Norbiton - Parliamentary Secretary (HM Treasury)
The Government recognises crucial role of the financial sector in decarbonising the economy, whilst safeguarding investors.
As set out in The Green Finance Strategy in March 2023, the Department of Work and Pensions have committed to hold a series of stakeholder roundtables on this matter, planned for this Spring.
The Financial Reporting Council have also committed to undertake a fundamental review of the UK Stewardship Code 2020.