The Bank of England announced it would cease accepting bonds tied to thermal coal in loan arrangements available to commercial banks, a decision that takes effect in October. The policy applies to collateral requirements for loans the central bank issues to major financial institutions such as Barclays, Lloyds, NatWest, and HSBC, which use such collateral as guarantees when borrowing from the central bank.
The Bank of England justified the policy by noting that thermal coal companies face potential financial risks related to economic transitions toward net zero emissions. The central bank stated it would also apply discounts to bond values in other relevant sectors to mitigate climate-related financial risks on its balance sheet. The decision reflects a view that thermal coal bonds present unacceptable risk exposure given the global shift away from fossil fuels toward cleaner energy sources.
The policy represents a stricter stance than those adopted by most Western counterparts, including the European Central Bank. The Bank of England disclosed the measure quietly through its website in early June, drawing limited public attention prior to the recent announcement. Climate advocacy groups have characterized the decision as a significant victory, with supporters noting it sends a strong signal to financial markets about the perceived riskiness of thermal coal assets.
Approximately 150 of the world’s largest financial companies already maintain some restrictions on thermal coal business dealings, according to data from the Paris-based nonprofit Reclaim Finance. Climate campaigners hope the new policy will prompt commercial banks to reconsider holding thermal coal-linked assets on their balance sheets, though questions remain about implementation details and whether the restrictions should extend beyond thermal coal to encompass other fossil fuel activities and environmentally harmful practices.
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