Climate change

Climate change and the transition are impacting the macroeconomy and financial system. This matters for our mission to maintain monetary and financial stability.

Climate change, the economy and financial system

Climate change affects our planet, our economy and our financial system. So it is relevant to the Bank of England’s central mission to promote the good of the people of the United Kingdom by maintaining monetary and financial stability.

The rise in human activity – and the subsequent carbon and other greenhouse gas (GHG) emissions – since the industrial revolution has already had a considerable and measurable impact on our planet’s climate. Scientists estimate that global temperatures have risen by around 1°C since 1850, and could exceed 4°C by the end of this century if nothing is done to limit emissions.

For this reason, over 190 countries signed up to the Paris Agreement in 2015, which set out a global framework for combating climate change. Its primary goal is to limit global warming to well below 2°C, preferably to 1.5°C, compared to pre-industrial levels. Over recent years, more than 130 countries have announced their ambitions to reduce emissions to net zero, with many, including the UK, setting legally binding targets.

Achieving these targets will require large-scale reductions in GHG emissions globally. Estimates by bodies such as the Intergovernmental Panel on Climate Change (IPCC) suggest that countries must have by 2050 to achieve this. The transition to net-zero emissions is affecting all countries, sectors, and involves unprecedented structural change to the global economy.

Financial and economic losses related to physical risks are also rising, although the magnitude and timing of these losses remains uncertain. As extreme weather events become more frequent and intense, they can also amplify traditional financial vulnerabilities and disrupt economic activity. To address this, the Bank is enhancing its risk assessment tools and scenario analysis capabilities to ensure the financial system remains resilient and able to absorb climate-related shocks.

The physical effects of climate change and the transition to a net-zero economy are relevant to our mission to maintain monetary and financial stability. In particular, when left unmanaged, these effects can pose a threat to the stability of the wider financial system, and the safety and soundness of firms we regulate. 

The Bank’s climate work is spearheaded by two executives - James Talbot (Executive Director, International), who covers the Bank’s policy functions, and Vivienne Grafton (Executive Director, Central Operations), who covers the Bank’s physical operations.

Read speeches by members of our senior team to find out more about our response to climate change.

Latest updates and key speeches

  • 10 July 2025: Sarah Breeden, Deputy Governor for Financial Stability, gave a speech where she shared some real-world examples of how risks to price and financial stability from climate change are emerging now, and how they might grow going forward. She also emphasised the importance of work at the Bank and in the wider financial sector to build awareness of and resilience to these risks.

    09 May 2025James Talbot, Executive Director, International at the Bank of England and Chair of the Network for Greening the Financial System’s (NGFS) workstream on monetary policy, gave a speech discussing the channels through which climate shocks affect the economy, the trade-offs they can present for policymakers and why central banks need to better understand these risks.

    30 April 2025: The Prudential Regulation Authority (PRA) published its consultation paper CP10/25 on the management of climate-related risks by banks and insurers. This paper proposes updates to the PRA's supervisory expectations, originally published in 2019, to align with the latest international standards and ensure firms remain resilient in managing climate-related risks. David Bailey, Executive Director, Prudential Policy, also discussed the opening of the consultation period for CP10/25 at the Climate Financial Risk Forum.

    30 January 2025: The Prudential Regulation Authority published its Climate Change Adaptation Report (CCAR) 2025. The report sets out the response of the PRA to the risks posed by climate change to its operations and policy objectives in the period since October 2021 and outlines several areas of focus for the PRA in 2025.  

    29 November 2024In the November Financial Stability Report, the FPC considered how climate-related risks are relevant to its primary objective of protecting and enhancing the resilience of the UK financial system. The FSR also outlined the FPC’s approach to identifying and assessing climate-related financial stability risks, including its framework to consider how climate risks could affect the financial system.

    14 November 2024Catherin Mann, gave a speech at the Annual Conference of the Society of Professional Economists in London where she reflects on the last forty years of the ‘Great Moderation’. She compares and contrasts arguments that ‘good policy’ or ‘good luck’ may have brought about more macroeconomic stability. She then discusses the likely sources of higher volatility in the future, including climate change, global trade fragmentation, financial market volatility, and policy volatility. Catherine concludes by outlining the appropriate monetary policy strategy in a more volatile world.

    30 July 2024: The Bank published its Climate-related Financial Disclosure 2024, alongside its 2024 Annual Report. The disclosure sets out the Bank’s key climate-related developments in the year to 29 February 2024. It reports on: the climate risks, to which the Bank is exposed; the emissions associated with the Bank’s own financial and physical operations (considered a proxy for financial risk); and the Bank’s work on climate change in pursuit of its core mission.

    17 April 2024: The Bank published a Quarterly Bulletin that explores how central banks and financial institutions can use scenario analysis to measure climate-related financial risks. It focuses on how central banks and financial institutions can ‘extend’ macro-climate scenarios to undertake granular asset-level analysis of financial risks, drawing on examples from the Bank’s financial operations across sovereign bonds, corporate bonds and residential mortgages.

    6 July 2023The Bank published its Climate-related financial disclosure 2023 and Climate transition plan, alongside its 2023 Annual Report. The disclosure document reports on the Bank’s work on climate change in pursuit of its core mission, the climate risks it is exposed to and the emissions from its own physical and financial operations. The transition plan announces the Bank’s commitment to reduce greenhouse gas emissions from its physical operations to net zero by 2040 and sets out the Bank’s approach to achieve this.

    22 March 2023The Climate Financial Risk Forum (CFRF) held a symposium to celebrate the forum’s achievements over the past year through a varied programme of speeches and practical sessions. Highlights included speeches from Baroness Penn, HM Treasury Parliamentary Secretary; Richard Barker, International Sustainability Standards Board (ISSB) member; fireside chat between Sarah Breeden and Amanda Blanc, Aviva CEO; and discussion with working group representatives. The forum also completed the release of its third round of guides and other materials to help the financial sector address climate-related financial risks and opportunities. The forum is now in discussion about how to best to progress work in the fourth round.

    13 March 2023: The Bank and the PRA published the report on climate-related risks and the regulatory capital frameworks. The report brings together key findings which have been informed by a range of sources – notably the research submitted to our call for papers and the discussions at the Climate and Capital conference in October 2022.

This page was last updated 16 September 2025