How the Bank of England overplayed its hand on climate risk

Each year in the UK, the Chancellor of the Exchequer sends a letter of remit to the Governor of the Bank of England spelling out the Bank’s priorities for the coming year.  For the past two cycles the letter specifically included climate risk, but in the 2024 installment the brief was pointedly omitted.  

In analyzing this decision, It’s important to know that a general election looks almost certain to be held in the UK before the end of the year and that the Conservative government, which has been in power since 2010, is expected to be soundly defeated. 

On the one hand, the decision to remove climate risk was technically correct. On the other, the move is dangerously shortsighted and looks like either a political Hail Mary or an attempt to shore up the Conservative’s right-wing base ahead of the election.  The fact that both of these can be true at the same time is a result of the misalignment of the Bank’s stated mandate with the urgent need for action to achieve net-zero targets.