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Labour to make fighting global heating a priority for Bank of England

A Labour government will make fighting global heating a priority for the Bank of England as it seeks to put environmental sustainability at the heart of its plans to grow the economy, Rachel Reeves is to announce.

The shadow chancellor will say in a speech in London on Tuesday evening that if Labour wins the general election she will reverse Jeremy Hunt’s decision last year to downgrade the emphasis on climate change in Threadneedle Street’s main objectives.

Reeves’s announcement comes only weeks after she was criticised by environmentalists for drastically scaling back Labour’s plans to invest £28b a year in a Green Prosperity Fund – a key plank in its plan to cut greenhouse gas emissions and to achieve carbon net zero.

In her Mais lecture, the shadow chancellor will insist that Labour remains committed to greening the economy and will be able to achieve the twin goals of stability and higher growth only if it makes tackling the climate crisis a priority.

“There can be no durable plan for economic stability and no sustainable plan for economic growth, that is not also a serious plan for net zero,” she will say.

The chancellor writes letters once a year to the Bank of England governor to set the remit for the financial policy committee (FPC) and the monetary policy committee.

In November last year, Jeremy Hunt downgraded the emphasis put on climate change in both remit letters and removed climate change from a list of four objectives for the FPC – the body that identifies systemic potential risks to the financial system.

Writing to the Bank’s governor, Andrew Bailey, the chancellor said the FPC’s four priorities for supporting the government’s financial policy objectives were growth and competitiveness, competition and innovation, home ownership and boosting productive finance.

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In the previous year, climate change and energy security was listed as a priority, and when Rishi Sunak was chancellor in 2021 he outlined ambitious plans to make London a global centre for the channelling of finance into climate-friendly investment.

Bailey, and his predecessor, Mark Carney, have warned of the risks climate change poses to the financial sector, emphasising in particular the risk that investments in fossil fuels will become “stranded” assets that are difficult or impossible to sell. Carney has called for a “retooling” of the financial system so that every decision takes climate change into account.

Meanwhile, Bailey told a House of Lords committee last month that the Bank had already scaled back its work on supporting the government’s green agenda as a result of climate change being removed from the FPC’s priorities. “The depth and breadth of the work we do will be trimmed back somewhat”, he said.

Reeves will say: “Macroeconomic policy has an important role to play in our climate transition. Labour has already set out plans to require financial institutions and FTSE 100 companies to publish their carbon footprints and adopt credible net zero plans.

“Tonight, I can say more. I disagree with the current chancellor’s decision to downgrade the emphasis put on climate change in the remits for both Bank committees. So the next Labour government will reverse these changes, at the first opportunity.”

A Treasury source said: “The chancellor’s 2023 letter clearly sets out the importance of climate change to the FPC’s work. It’s there in black and white in relation to the FPC’s primary financial stability objective.

“Delivering net zero is also referenced as a key component of the government’s economic policy, which the committee has a secondary objective to support.”