The Bank of England's climate-related financial disclosure 2024

Foreword

I am pleased to publish our assessment of the climate-related risks relating to the Bank of England’s policies and internal operations for the year to 29 February 2024. We achieved an important milestone in July 2023 when we published the Bank’s first Climate Transition Plan, which aims to enhance the resilience of our internal operations by setting out our approach to deliver our net-zero target for physical operations by 2040.

During the year we have improved the specificity of our carbon footprint from physical operations by working with our suppliers to gain an improved understanding of their greenhouse gas emissions. At the end of the year, we remain on track to deliver both of the Bank’s physical operations emissions targets, each of which is consistent with limiting the rise in global average temperatures to 1.5°C above pre-industrial levels.^{footnote [1]}

Alongside this, we have advanced our understanding of the possible monetary policy implications of climate change, publishing our key findings in the February 2024 Monetary Policy Report. We released the Bank’s April 2024 Quarterly Bulletin on the Bank’s use of scenario analysis to measure climate-related financial risks associated with our own operations. And we continued to actively engage with the firms we regulate on their management of climate-related financial risks.

Looking ahead, our agenda will continue to focus on those aspects of this topic that are core to our objectives and remits. This includes work to update our supervisory expectations to reflect the latest regulatory thinking and analysis, align with relevant international standards and consolidate previous feedback to firms, such as through Prudential Regulation Authority Dear CEO letters.^{footnote [2] footnote [3]} We will also continue to advance our thinking on the impacts of climate change and the transition on financial stability, the macroeconomy and monetary policy.

Ben Stimson
Chief Operating Officer of the Bank of England

Executive summary

This climate disclosure sets out the Bank of England’s (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, which we consider to be a proxy for financial risk; and
• the work the Bank does on climate change in pursuit of its core mission to promote the good of the people of the United Kingdom by maintaining monetary and financial stability.

Consistent with previous years, the disclosure follows the structure recommended by the Financial Stability Board’s (FSB’s) Task Force on Climate-related Financial Disclosures (TCFD), covering four key elements: governance; strategy; risk management; and metrics and targets.^{footnote [4]} Key developments this year include:

Governance

Climate risks are incorporated within the Bank’s internal governance and risk management frameworks, complemented by climate-specific processes where appropriate. As part of this, climate risks relevant to the Bank’s mission are discussed at the Bank’s senior executive committees prior to decisions being implemented by management across the Bank. Climate risks are also subject to additional governance processes due to the inclusion of climate change as one of the Bank’s seven strategic priorities.

At a management level, the Bank’s climate work is led by two Deputy Governors: Sarah Breeden (Deputy Governor, Financial Stability) covers the Bank’s policy functions and Ben Stimson (Deputy Governor, Chief Operating Officer) covers the Bank’s physical operations.

Climate change is relevant to the Bank’s work in a variety of areas; from how it heats its buildings to the setting of risk management expectations for banks and insurers regulated by the Prudential Regulation Authority (PRA). For that reason, the Bank has an Executive Director-level cross-Bank steering group to discuss the design, implementation and execution of the Bank’s climate strategy and work plan.

Strategy

Climate change and the transition to a net-zero economy are relevant to the Bank’s mission to promote the good of the people of the UK by maintaining monetary and financial stability^{footnote [5]} because they create financial risks and economic consequences, which could affect:

• the safety and soundness of firms the Bank regulates;
• the stability of the financial system;
• the economic outlook in a way that could have a bearing on the appropriate monetary policy stance; and
• the financial resources available to deliver the Bank’s policy and operational commitments.

In response, at the time of publication, the goal of the Bank’s policy work on climate change and the transition to net zero is to play a leading role in enhancing the resilience of the UK financial system and in understanding the impacts on the macroeconomy. Complementing this work, the Bank aims to enhance the resilience of its own physical operations through its Climate Transition Plan (CTP) to deliver net-zero greenhouse gas (GHG) emissions from its physical operations by 2040.^{footnote [6]}

Under the Bank’s climate strategy, its policy work for 2023/24 was organised across five pillars:

In April 2024, the Bank updated these pillars:

Progress has been made against the Bank’s climate strategy since March 2023, including:

• issuance of the Bank’s first CTP in July 2023;
• publication of the key findings of the Bank’s latest work on the possible monetary policy implications of climate change in the February 2024 Monetary Policy Report;
• release of the Bank’s April 2024 Quarterly Bulletin on the Bank’s use of scenario analysis to measure climate-related financial risks associated with its own operations; and
• the PRA’s continued engagement with firms it regulates on their management of climate-related financial risks.

Risk management, metrics and targets

The Bank is itself exposed to climate risks across both its physical operations (eg due to physical risks to its buildings) and its financial operations (eg financial asset portfolios held for monetary policy purposes). This climate disclosure sets out the Bank’s approach to measuring and managing these risks.

This year the Bank’s critical metrics for climate risk have been refreshed to provide enhanced insight and better reflect the Bank’s Physical Greenhouse Gas Emissions Target (PGGET), which was announced in last year’s climate disclosure. The Bank’s critical metrics for climate risk are reported quarterly to the Bank’s executive and non-executive risk committees.

The Bank’s financial operations

The Bank continues to demonstrate best practice in climate risk reporting on its financial asset holdings, by disclosing analysis of its sovereign and corporate asset^{footnote [7]} holdings and enhancing its analysis to align with the latest guidance. In addition, this year the Bank is also reporting on its largest collateralised lending operation – the Term Funding Scheme with additional incentives for SMEs (TFSME).^{footnote [8]}

Collectively, the Bank’s analysis suggests that its sovereign bond holdings continue to be exposed to material climate-related financial risks, but those risks remain lower than a G7 reference portfolio:

• Implied Temperature Rise (ITR) metrics for the Bank’s sovereign bond holdings have remained stable and suggest that the Bank’s sovereign bond holdings are aligned with the 2°C Paris goal, but not with the 1.5°C ambition. By this measure the holdings continue to perform better than a G7 reference portfolio.
• The Bank continues to build out its scenario analysis capabilities. This analysis suggests that the value of the Bank’s sovereign bond holdings could fall by up to 10% in the most adverse climate scenario. This assumes that markets immediately and fully price in the effects of a very adverse scenario on future interest rates and debt levels. However, these effects are uncertain and will be determined by the actions of governments, central banks, and financial markets.
• Although the Bank continues to track the Weighted Average Carbon Intensity (WACI) and Natural Resource Rents (NRR) of its sovereign portfolios, both of these metrics are currently subject to volatility and so their usefulness as measures of financial risk are more limited. Further information is set out in Section 3 of this disclosure.

Alongside this work, the Bank is taking several steps to mitigate climate-related financial risks to residential mortgage collateral posted in the Sterling Monetary Framework (SMF). These approaches mitigate the Bank’s exposure to transition and physical risks facing owner-occupied and buy-to-let mortgage collateral.^{footnote [9]}

The Bank’s physical operations

This disclosure reports on the Bank’s extended carbon footprint from physical operations, which was first set out in the Bank’s CTP and in this climate disclosure in 2022/23.^{footnote [10]}

This year the Bank’s carbon footprint is estimated at 78,919 tCO₂e, 21% (20,372 tCO₂e) lower than 2022/23 and 45% (65,458 tCO₂e) lower than the baseline year of 2015/16, against which the Bank measures progress.

The most significant contribution to the emissions reduction relative to 2022/23 is a fall in estimated emissions from purchased goods and services due to the receipt of more accurate data and methodological improvements. In line with the GHG Protocol, in 2022/23 the Bank used a conservative approach to estimate these emissions in the absence of product or service-specific supplier data. This year it has worked with suppliers to improve the specificity of its estimates, which has removed some of that conservatism and led to a reduction in the headline numbers. This is illustrative both of the rate of development in this space and the Bank’s commitment to engage with its suppliers to improve its emissions reporting.

The Bank’s improved understanding of its emissions will impact current, prior year and baseline balances in different ways. During this period of rapid change the Bank does not plan to restate its baseline emissions on an annual basis but will instead revisit this alongside the next detailed update of the CTP to be published in Summer 2026.

The Bank is on track to meet its PGGET as well as its ‘2030 Target’ to reduce selected GHG emissions by 63% from 2015/16 to 2030. Both targets align with the reduction in emissions needed to be consistent with limiting the rise in global average temperatures to 1.5°C above pre-industrial levels.

1: Governance

Climate-related considerations are relevant to the Bank’s mission,^{footnote [11]} functions and operations and are therefore embedded in its organisation-wide governance framework.

Oversight

The Bank’s Court of Directors (Court)^{footnote [12]} and its Audit and Risk Committee (ARCo)^{footnote [13]} oversee the Bank’s management of climate-related risks (climate risks). Their role is supported by established responsibilities for climate matters, which have been allocated across the Bank’s executive committees,^{footnote [14]} steering groups and management team.

The Bank also has four statutory policy committees,^{footnote [15]} which collectively discharge the Bank’s statutory functions in relation to monetary policy, financial stability, prudential regulation and financial markets infrastructure regulation.

Court reviews the Bank’s progress against climate risk targets on an annual basis as part of its review of this climate disclosure and the Bank’s Annual Report. Critical metrics for climate risk are reported to ARCo four times a year, more frequently if needed. Executive committees review and approve the Bank’s climate strategy for its policy work at least once a year and oversight of the Bank’s physical operations carbon strategy is achieved via the executive committees responsible for operational matters. The Bank’s four statutory policy committees take into account climate-related factors within the legal framework applicable, as described in Annex 1.

Figure 1.1: Organogram illustrating the bodies relevant to governance of the Bank’s work on climate change

Footnotes

• Source: Bank of England.

Management

The Bank’s climate work is led by two Deputy Governors who work closely together:

• Sarah Breeden, Deputy Governor, Financial Stability (DGFS), who has responsibility for climate risks to the Bank’s policy functions and also holds the Senior Management Function with responsibility for the financial risks from climate change (SMF Climate);^{footnote [16]} and
• Ben Stimson, Deputy Governor, Chief Operating Officer, who has responsibility for climate risks to the Bank’s physical operations.

At Executive Director (ED) level, the Bank’s climate work is overseen and delivered by James Talbot (ED, International Directorate), on climate policy issues, and Vivienne Grafton (ED, Central Operations Directorate), on operational issues.

The primary management forum for co-ordinating climate work across the Bank is the Executive Directors’ Climate Steering Group. Chaired by James Talbot, it facilitates discussion among the Bank’s EDs on strategic climate operational and policy issues and supports Court and the Bank’s executive and statutory policy committees in their work on climate policy matters. This year, the Bank appointed its first Chief Sustainability Officer (CSO), Chris Faint, with responsibilities encompassing both climate policy and internal sustainability matters. The CSO leads the new Climate, Sustainability and Community (CSC) Division which spans the Central Operations and International Directorates, with reporting lines into both ED International and ED Central Operations. This new structure, which includes the existing operations of the Bank’s Climate Hub, is designed to support consistency of approach across the Bank’s policy functions and physical operations.

The Bank’s operational climate work is developed and implemented by the Sustainability Team who have expertise in sustainability, procurement and engineering. The Sustainability Team sits within the Climate Sustainability and Community Division in Central Operations, reports into the CSO and engages closely with areas across the Bank.

For its climate policy work the Bank operates a ‘hub and spoke’ model. At the centre sits the Climate Hub, a dedicated team of climate specialists, which supports SMF Climate and implementation of the Bank’s climate policy strategy across the organisation. Each spoke has one or more climate leads who are responsible for directing climate-related work within their area and co-ordinating with the Climate Hub and across other spokes. This aims to balance development of climate expertise with embedding consideration of climate risk across the Bank.

2: Strategy

The physical effects of climate change and the transition to a net-zero economy present risks to the Bank’s mission^{footnote [17]} because they create financial risks and economic consequences, which could affect:

• the safety and soundness of firms the Bank regulates;
• the stability of the financial system;
• the economic outlook in a way that could have a bearing on the appropriate monetary policy stance; and
• the financial resources available to deliver the Bank’s policy and operational commitments.

Reflecting the diverse and interconnected nature of these risks, ‘respond[ing] to the challenge of climate change’ is one of the Bank’s seven strategic priorities for 2022 to 2025.^{footnote [18]}

The Bank’s climate strategy is designed to address the risks from climate change by focusing allocated resources on those areas that have the most material impact on its mission. This strategy reflects the remit of the Bank’s statutory policy committees as specified by the Chancellor of the Exchequer in his annual letters. Further information on the climate-related elements of the remit of each of the policy committees is set out in Annex 1.^{footnote [19]}

At the time of publication, the goal of the Bank’s policy work on climate change and the transition to net zero is to play a leading role in enhancing the resilience of the UK financial system and in understanding the impacts on the macroeconomy. Complementing this work, the Bank aims to enhance the resilience of its own physical operations through its Climate Transition Plan (CTP) to deliver net-zero greenhouse gas (GHG) emissions from its physical operations by 2040.^{footnote [20]}

Under the Bank’s climate strategy, its policy work for 2023/24 was organised across five pillars, which are set out in Figure 2.1.

Figure 2.1: The Bank’s strategy Pillars for 2023/24

Footnotes

• Source: Bank of England.

The Bank updated these pillars in April 2024 to focus on three core areas, which are set out in Figure 2.2.

Figure 2.2: The Bank’s strategy Pillars for 2024/25

Footnotes

• Source: Bank of England.

The Bank has made progress against its climate strategy since March 2023:

Pillar 1: Ensuring the financial system is resilient to climate-related financial risks

The Bank is using its micro and macroprudential toolkits to build resilience to climate risks at both an individual firm and a system-wide level.

Microprudential activities

This year the PRA continued to actively supervise firms against its supervisory expectations, which set out how banks and insurers should enhance their approaches to managing the financial risks from climate change.

In September 2023 the PRA issued a letter to CFOs of banks within scope of its written auditor reporting, providing thematic findings consistent with, and building upon, these supervisory expectations.^{footnote [21]} It noted that while banks had taken action to enhance their governance, data and risk assessments, several areas required further focus, for example, the determination of metrics to identify the loan portfolios and segments that could be most impacted by climate risk.

In January 2024 the Bank confirmed that it was beginning work to update its April 2019 supervisory expectations, which were set out in Supervisory Statement 3/19 (SS3/19). The revisions are expected to provide clarity to firms and build on the SS3/19 approach. The work is expected to consolidate previous Bank feedback to firms, such as through the Dear CEO letters,^{footnote [22] footnote [23]} draw on Bank analysis since April 2019 and generally align with relevant international standards from the Basel Committee on Banking Supervision (BCBS) and the International Association of Insurance Supervisors (IAIS).

Alongside this supervisory work, the Bank shared its views on the integration of climate-related risks and regulatory capital frameworks in a report published in March 2023. The report drew on staff work and the capital conference held by the Bank in October 2022. It included updates on capability and regime gaps, capitalisation timelines and areas for future research and analysis, and has informed the Bank’s supervisory work in 2023/24.

The Bank has noted the importance of scenarios as a tool for understanding how future risks might arise and has invested in developing these tools. It has been active in the Network for Greening the Financial System^{footnote [24]} (NGFS) where it contributed to a number of deliverables, including: a technical document providing guidance on the purpose and use of the NGFS scenarios; and a conceptual paper exploring how short-term climate scenarios can be integrated into wider NGFS models. In April 2024, the Bank published a Quarterly Bulletin article on its use of scenario analysis to measure climate-related financial risks associated with its own operations. The article explained how the Bank approaches ‘extending’ climate scenarios to measure asset-level financial risks across sovereign bonds, corporate bonds and residential mortgages, providing practical insights which may be of relevance to other financial institutions.

Throughout the reporting period the PRA has continued to work jointly with the Financial Conduct Authority to convene the Climate Financial Risk Forum (CFRF), an industry group established to share best practice on climate issues and accelerate firms’ capabilities to address climate change. David Bailey (ED, Prudential Policy) took up the co-chair role for the Bank in January 2024. The CFRF holds an annual plenary, the last of which was held in March 2023, and the group issues regular documentation, which is available on the CFRF website.

Macroprudential work

The Bank continues to monitor financial stability risks from climate change and the transition to a net-zero economy.

In March 2022 the Financial Stability Board set up the Climate Vulnerabilities and Data group under the Standing Committee on Assessment of Vulnerabilities. The group aims to develop a framework and an analytical toolkit to monitor climate vulnerabilities globally. From June 2023, Sarah Breeden (DGFS) took on the role of chair.

Pillar 2: Understanding how climate change and the transition impacts the macroeconomy

Where climate change or the transition to net-zero emissions have an impact on the economy, these changes could represent relevant economic trends and so – as is the case for other structural trends – it is appropriate for monetary policy makers to consider their impact.

The Bank has continued to explore the macroeconomic effects of climate change relevant to their statutory objective to deliver price stability for the UK economy. This year the MPC considered the assessment of the possible monetary policy implications of those macroeconomic effects. It looked at the impact of net-zero consistent policies on productivity growth in the medium and long term and published its key findings in the February 2024 Monetary Policy Report.

In the Dow Lecture on climate change, the macroeconomy and monetary policy, James Talbot (ED, International Directorate) discussed how central banks are working together to resolve the macroeconomic modelling challenge; and to develop analytical foundations to understand the macro impacts of climate change and the transition to net zero.

Internationally the Bank has been active in supporting the development of an international approach to assess and manage the risks to monetary stability from climate change in fora including the NGFS and G7.

The NGFS Workstream on Monetary Policy, which is chaired by James Talbot, aims to understand how climate change and climate policies should be considered in relation to the conduct of monetary policy. In July 2023 it issued a report highlighting key takeaways from a survey of its members on the implications of climate change and the net-zero transition on their economies and monetary policies, as well as the steps taken to integrate climate change considerations into monetary policy operations frameworks. In July 2024 it issued a report on current progress and practical insights into adapting central bank operations to a hotter world.

Pillar 3: Supporting an orderly economy-wide transition to net-zero emissions

The primary levers for driving an orderly economy-wide transition to net-zero emissions rest with the UK Government in setting climate policy, and with corporates and individuals through the choices they make. However, the Bank’s actions to ensure a resilient financial system can in some circumstances catalyse or amplify the effects of UK Government climate policy and support the transition to a net-zero economy, for example through its work to ensure firms are managing the risks they might face during the transition.

This year the Bank has supported the UK Government as it developed its 2023 Green finance strategy. It also supported the UK Government’s work to consider endorsement of the International Financial Reporting Standards Foundation’s International Sustainability Standards Board’s inaugural global sustainability disclosure standards, which were published on 26 June 2023. The transparency provided through high-quality, comprehensive and internationally consistent climate disclosures across the economy can improve financial firms’ risk management and enable better informed decision-making.

The Bank has been an observer on HM Treasury’s TPT, which published its final disclosure framework for transition plans in October 2023 and the final technical resources, including final sector guidance in April 2024. These publications help define the standards for transition plans by establishing robust criteria and the effective use of science-based targets, providing better forward-looking information. This will enable better risk management and the mobilisation of finance for the transition.

Internationally, the Bank has supported the development of a co-ordinated international approach to transition planning. This work helps to enhance the resilience of the financial system by improving the quality, international consistency and reliability of the forward-looking information disclosed, which in turn improves financial firms’ risk management and enables better informed decision-making. The Bank co-led the NGFS Workstream on Transition Plans, which published a stocktake on emerging practices in financial institutions’ transition plans and their relevance to microprudential objectives in May 2023. A further package of reports was published in April 2024 exploring the broader context within which transition planning takes place. To facilitate the sharing of knowledge across central banks, in December 2023 the Bank hosted a virtual conference focusing on climate disclosures and transition plans from a central banking perspective.

Pillar 4: Working towards a timely and co-ordinated international approach to climate change

The Bank engages with other central banks and prudential regulators through its position in international climate-related fora, in support of work on its statutory objectives.

The Bank is a member of the climate workstreams of a number of international standard setting groups. Contributions this year include work on the BCBS’ discussion paper on the role of climate scenario analysis in strengthening the management and supervision of climate-related financial risks, and on a paper on scenario analysis in the insurance sector by the IAIS’ Scenario Analysis working group, which the Bank co-chairs.

The Bank also participates in the NGFS and the Sustainable Insurance Forum (SIF). The Bank sits on the NGFS’ steering committee and, through the forum, aims to share its own experience, learn from others, and promote consistent and effective responses to climate risks by central banks and supervisors across the world. This year the Bank contributed to the second edition of the NGFS ‘Guide on climate-related disclosure for central banks’, drawing on the Bank’s own approach to climate disclosure. Its contributions to other NGFS Workstreams are detailed under Pillars 1, 2 and 3. The Bank also participates in the SIF to advance supervisory responses to climate change in the insurance sector across the globe.

The Bank also works with the UK Government to deliver progress on climate, including through the G7 Finance Track, the G7 Climate Change Mitigation Working Group, and the G20 Sustainable Finance Working Group (SFWG). Through the SFWG, the Bank is helping to deliver against the G20 Sustainable Finance Roadmap, which seeks the implementation of the transition finance framework developed in 2022 and supports efforts on capacity building and mobilising private finance. This year the Bank disclosed its developments against the roadmap to highlight UK progress in sustainable finance.

By its nature, the Bank’s international work spans its climate strategy. Additional examples of the Bank’s international work have been included under the other four pillars, where relevant.

Pillar 5: Ensuring the Bank is resilient to the risks from climate change and sharing our work to benefit others

Ensuring the Bank is resilient to the risks from climate change

The Bank holds itself to the same climate-related standards that it expects of the firms it regulates and the financial system it oversees. It is therefore taking steps to ensure its own operations are resilient to the risks from climate change – a prerequisite for the Bank to deliver its core mission. This includes reducing emissions from the Bank’s physical activities (such as its buildings, production of banknotes, and travel) and measuring and mitigating climate-related financial risks to its financial market operations. The Bank mitigates the climate-related financial risks to its financial operations to the extent possible without adversely affecting its primary objectives of monetary and financial stability. The Bank has considered how its approach to its own operations, where relevant, map to the supervisory expectations it has set for PRA-authorised banks and insurers in Table 2.A of the Bank’s climate-related financial disclosure 2023.

Sharing our work to benefit others

Given the evolving nature of the field, the Bank takes a collaborative approach to its work on climate change.^{footnote [25]} In instances where it has advanced its understanding or where it believes that progress is needed, the Bank aims to share what it has learned and catalyse discussion and development, for example through speeches, publications or conferences. This disclosure is one such publication, providing an overview of the Bank’s key activities during the year and links to many materials made available online since 1 March 2023.

The Bank also has a specialist team, the Centre for Central Banking Studies, dedicated to the provision of training to other central banks and regulators on topics including climate-related financial regulation.

The Bank’s Climate Transition Plan (CTP)

In July 2023, the Bank published its CTP, setting out its approach to deliver net-zero GHG emissions from the Bank’s physical operations by 2040.^{footnote [26]} The Bank’s strategy for implementation of its transition to net-zero emissions was included in the CTP. Over the year the Bank has taken steps to embed this strategy – these are detailed in ‘Key climate-related risks in the Bank’s physical operations’ in Section 3.

Banknotes

This year the Bank has continued to undertake a detailed analysis to understand the environmental impact of each banknote component and process. This will facilitate targeting environmental impact reduction initiatives in the near term, with a view to informing the next series of banknotes, including any cost savings or expenditure required to enable the transition.

3: Risk management, metrics and targets

The Bank is itself exposed to climate risks across both its financial operations (eg due to physical or transition risks impacting the value of its financial assets) and its physical operations (eg due to physical^{footnote [27]} or transition^{footnote [28]} risks to its buildings). Climate risks are identified, monitored and managed using the Bank’s established risk management framework that spans all of its functions.

Within that framework, climate change is identified as a ‘Key Risk Type’ and is overseen by a named ‘Risk Custodian’. This year the Bank appointed James Talbot as Risk Custodian for climate change. As Risk Custodian, supported by the Bank’s second line risk function, James Talbot is responsible for defining a set of risk metrics and tolerances to capture the full range of operational and financial climate risks to which the Bank is exposed; monitoring and reporting those metrics and, where appropriate, co-ordinating the timing and implementation of mitigants.

This year the Bank began reporting climate risks under a new set of climate metrics, which provide enhanced insight and better reflect the Bank’s Physical Greenhouse Gas Emissions Target (PGGET), as announced in last year’s disclosure.

The Bank also assesses climate risks across the near-term horizon, through regular Risk and Control Self Assessments prepared by each of the Bank’s key functions and, for risks which are more uncertain or less proximate, through regular analysis of emerging risks.

The remainder of this section sets out the key climate risks the Bank has identified to its financial and physical operations, including the metrics and target that it uses to monitor and assess those risks.

Key climate-related risks in the Bank’s financial operations

Introduction

Financial operations covered in the Bank’s climate disclosures

The Bank engages in market operations to achieve its monetary policy and financial stability objectives. This includes holding sovereign bonds and other fixed-income instruments and offering secured lending to financial counterparties. As part of managing the financial risks involved in this secured lending, the Bank manages a wide range of collateral. The full range of the Bank’s policy and balance sheet tools are set out in the Bank of England Market Operations Guide.

The largest proportion of the Bank’s financial assets is held in a separate legal vehicle known as the Bank of England Asset Purchase Facility Fund Limited (BEAPFF), indemnified by HM Treasury, to implement the MPC’s asset purchase programme. At 29 February 2024, sterling UK government bonds (gilts) represented 99.9% of that portfolio (Table 3.A).

Holdings in the Asset Purchase Facility (APF) continued to decrease in 2024, reflecting the MPC’s monetary policy decisions (Table 3.A). As part of this, the Bank has concluded a corporate bond sales programme, with only a small number of very short maturity corporate bonds remaining at the end of the reporting period for this report. These have all matured as of publication.^{footnote [30]} The Bank is also reducing the stock of gilts held in the APF as instructed by the MPC via allowing gilts to mature and a programme of gilt sales.^{footnote [31]}

The Bank’s own securities holdings, composed of the Sterling Bond portfolio and the Bank’s own foreign currency reserves,^{footnote [32]} have remained largely constant in size.

Climate metrics in the Bank’s climate disclosure cover assets held on the Bank’s balance sheet described in Table 3.A.^{footnote [33]} In general, the Bank’s collateralised lending operations continue to be excluded from the disclosures. However, the Bank does for the first time disclose data on one of these operations – the Term Funding Scheme with additional incentives for small and medium-sized enterprises (TFSME). Since 2022, the climate disclosure related to the Bank’s staff pension fund has been published separately, alongside the Pension Fund Report and Financial Statements.^{footnote [34] footnote [35]}

The Bank’s climate risk management framework continues to evolve in line with best practice year on year (Figure 3.1). For example, in the last year the Bank developed more advanced methodologies to measure climate financial risks in sovereign bonds, as well as residential mortgages. Some of these are set out in more detail in the Bank’s April 2024 Quarterly Bulletin and key insights are also reflected in these disclosures.