Bank of England details climate risks, meets decarbonisation goal
The Bank of England has published its climate-related financial disclosure for the year ended 28 February 2026. The report details the integration of climate considerations across its functions and highlights progress against decarbonisation targets.
Financial system faces climate repricing
The Bank's climate strategy addresses risks relevant to monetary and financial stability, including the safety of regulated firms and the economic outlook.
Recent analysis indicates that climate risks to firms and financial stability are becoming more proximate.
Bank staff estimate that a rapid repricing of financial assets, including government debt, corporate bonds, and equities, to reflect climate risks could lead to market moves comparable to recent stress episodes.
A 2025 data collection revealed that UK banks could face climate-related credit losses, particularly from transition risks like sharp increases in energy and carbon prices.
The Financial Policy Committee (FPC) emphasizes supporting insurability to benefit UK financial stability.
While some PRA-supervised firms have strengthened climate risk capabilities since 2019, progress remains uneven, necessitating further work to meet updated expectations (Supervisory Statement 5/25).
Decarbonisation milestone achieved
The Bank of England achieved its first interim decarbonisation milestone, reducing greenhouse gas emissions from physical operations by 43% since 2015/16, exceeding the 40% target.
Alongside this disclosure, the Bank published the second edition of its Climate Transition Plan (CTP), updating its strategy to reduce emissions and recalculating its transition pathway.
The Bank has also further incorporated Climate Scenario Analysis (CSA) into its in-house credit rating methodology for sovereign issuers and financial counterparties.
This work informs exposure limits and capital holdings.
Through the NGFS, the Bank has collaborated with other central banks to assess climate change impacts on the macroeconomy, finding increasing effects on output and inflation, relevant for monetary policy.
Transparency, yet inherent uncertainties
While the Bank of England's disclosure provides commendable transparency, it also underscores the profound uncertainties in quantifying climate risks.
The reliance on scenario analysis, despite its utility, cannot fully capture complex, non-linear environmental tipping points.
This necessitates continuous refinement of methodologies and a cautious approach to policy implications.