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MPs urge Bank of England to regulate fossil fuel finance

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Andrew Bailey, Governor, Bank of England
Andrew Bailey was called on to take action. Photo: PA

The Bank of England's (BoE) governor Andrew Bailey was on Thursday urged to take broader action on climate change, as more than 50 cross-party MPs co-signed a letter calling for a greener financial system. 

The letter, signed by MPs including former Green Party leader Caroline Lucas, Barry Gardiner and former shadow chancellor John McDonnell, urged that the bank has an "unprecedented opportunity to shape the global green finance agenda" and launched renewed calls for a rethink of regulation around how finance approaches the environment. 

It recommends the BoE uses the new green mandate given to it by the Treasury to help steer billions of pounds of finance away from risky fossil fuel investments and towards green, job-creating alternatives.

The signatories warned that climate change and biodiversity loss are already jeopardising the Bank’s ability to meet its core objectives, and urged Bailey to put its new green remit into practice “in a manner commensurate with the scale and urgency of the challenges we are facing”.

“Finance has been identified as a COP26 priority by the UK so we need to get our own house in order. That starts with the Bank of England setting out clear rules to penalise fossil fuel lending and encourage the essential investment in sustainable infrastructure and green jobs," said Caroline Lucas, MP for Brighton Pavilion.

It argues the Bank of England’s own asset purchases are currently aligned with 3°C of warming – double the target the UK is committed via the Paris Agreement.

Emissions from projects financed by the UK banking sector are greater than those of other European countries. Barclays and HSBC alone have poured more than £185bn ($255.61bn) into fossil fuels since the signing of the Paris Agreement in November 2015, more than three times the amount it would cost to power all UK homes with offshore wind by 2030. 

The letter remains open for parliamentarians to sign-on until October, when a full list of signatories will be delivered to the Bank of England.

Yahoo Finance contacted the BoE for comment. 

Read more: Trillions held in the financial system 'fuels inequalities' in tackling sustainability

Earlier this month, wildlife charity WWF also called on the government to take action on the financial system, which it said is contributing to deforestation through funding companies that harm the environment. Agricultural commodities such as Brazilian beef and soy and Indonesian palm oil are among the products responsible for more than a quarter (27%) of deforestation.

It found that almost £40bn in investment and lending has gone to companies that directly produce, trade and buy these products as a primary business activity, by 303 different UK-domiciled financial institutions and funds.

Watch: How climate change has intensified hurricane season

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