The Bank of England announced it will no longer accept bonds linked to thermal coal as collateral in its lending arrangements to commercial banks, a policy set to take effect in October. The central bank made the decision based on financial risk considerations, noting that thermal coal companies face potential exposure to economic risks associated with the transition toward net-zero emissions.
The policy applies to the collateral that commercial banks such as Barclays, Lloyds, NatWest, and HSBC must provide when borrowing from the central bank to facilitate routine transactions and operations. The Bank of England indicated it would also adjust the value of bonds in other relevant sectors to mitigate financial risks related to climate transition. The central bank disclosed the policy through a statement posted to its website earlier in the summer, with limited public announcement accompanying the decision.
Environmental advocates have characterized the move as significant, viewing it as a strong market signal that thermal coal assets are increasingly untenable. Representatives from climate-focused organizations noted the policy is stricter than those currently employed by most major central banks, including the European Central Bank. However, activists have suggested the Bank of England could extend restrictions beyond thermal coal to encompass a broader range of environmentally harmful activities and fossil fuel expansion.
The timing of the announcement coincides with a period of heightened pushback against climate-focused financial policies, particularly following political shifts that have prompted major financial institutions to reassess their climate commitments. Industry data indicates that approximately 150 of the world’s largest financial companies already maintain some form of restrictions on thermal coal business activities. Experts emphasized that the ultimate effectiveness of the Bank of England’s policy will depend on implementation details, including how the central bank calculates financial adjustments to account for climate-related risks.
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