Bank of England must better address climate risk to tackle inflation, WWF says – The Independent

Report on the Bank of England’s Role in Advancing Sustainable Development Goals

Introduction: Aligning Financial Stability with Global Sustainability Targets

A report issued by the World Wide Fund for Nature (WWF) urges the Bank of England to enhance its strategy for addressing environmental risks. The paper posits that integrating climate and nature-related considerations is crucial for managing inflation and ensuring long-term financial stability, thereby supporting the United Kingdom’s commitment to the Sustainable Development Goals (SDGs). The central argument is that the Bank’s current approach lags behind international counterparts in aligning its mandate with the transition to a net-zero, nature-positive economy, which is fundamental to achieving several SDGs.

Key Findings: Environmental Risks and Economic Implications for SDGs

The WWF analysis highlights the direct impact of environmental degradation on the UK economy and its alignment with key global goals. The primary concerns are:

• Impact on SDG 8 (Decent Work and Economic Growth): Climate change and nature loss are identified as significant threats to price stability, financial stability, and overall economic growth, which are foundational pillars of a sustainable economy.
• Impact on SDG 1 (No Poverty) and SDG 2 (Zero Hunger): Climate-induced disruptions to global food supply chains are driving price inflation for imported commodities like fruit, vegetables, coffee, and cocoa. This directly affects the cost of living and undermines efforts to combat poverty and ensure food security.
• Impact on SDG 11 (Sustainable Cities and Communities) and SDG 13 (Climate Action): Increasing climate-related events, such as flooding, are rendering properties uninsurable, threatening community resilience and financial stability. This demonstrates a tangible economic consequence of failing to adequately address climate action.

Recommendations for Aligning with SDG 13 (Climate Action)

Campaigners and economists have put forward a series of recommendations for the Bank of England to better integrate climate action into its core functions. These proposals are designed to ensure the financial system supports an orderly transition to a sustainable economy.

1. Enhance Analytical Capacity: The Bank should develop greater technical expertise on climate and nature-related financial risks and widely communicate its findings to policymakers and the public to foster a shared understanding of the threats to SDG achievement.
2. Align Core Policymaking: The Bank is encouraged to align its monetary and regulatory policies with a net-zero transition, drawing on best practices from other central banks while developing innovative approaches.
3. Adapt Market Operations: Recommendations include adapting market operations to be consistent with and supportive of an orderly transition, ensuring the Bank’s own activities contribute positively to climate goals.
4. Strengthen Partnerships for the Goals (SDG 17): The Bank should coordinate more effectively with government fiscal policy and industrial strategy. This partnership is essential for responding to climate-induced supply-side shocks and creating a coherent national strategy for sustainable development.

Conclusion: A Call for Enhanced Institutional Commitment

The call for the Bank of England to intensify its focus on environmental risks reflects a growing consensus that financial and monetary policy are critical levers for achieving the Sustainable Development Goals. Critics, including over 50 economists and campaign groups, have previously warned that the Bank is falling behind its peers, citing a reduction in resources allocated to climate change work. The WWF report reinforces this concern, framing the issue not only as a matter of environmental protection but as a core component of the Bank’s mandate to secure economic and financial stability for the UK in line with global sustainability commitments.

Sustainable Development Goals (SDGs) Addressed in the Article

The article highlights several interconnected issues that touch upon multiple Sustainable Development Goals. The central theme revolves around the economic and financial consequences of environmental degradation, specifically climate change and nature loss, and the role of a central financial institution in mitigating these risks. The following SDGs are addressed:

• SDG 13: Climate Action: This is the most prominent SDG in the article. The entire piece is centered on the need for the Bank of England to address “environmental risks,” with repeated mentions of “climate change,” the transition to a “net zero” economy, and specific climate impacts like “increasing flood risk” and “extreme weather events.”
• SDG 8: Decent Work and Economic Growth: The article directly links environmental issues to core economic principles. It states that climate change and nature loss have “negative impacts on price stability, financial stability and growth,” which are described as the “bedrocks of the UK economy.” The call for a transition to a “nature-positive economy” also aligns with the goal of decoupling economic growth from environmental degradation.
• SDG 15: Life on Land: The article explicitly mentions the need to manage risks related to “nature loss” and supports a transition to a “nature-positive economy.” This directly connects to the goal of protecting and restoring terrestrial ecosystems.
• SDG 2: Zero Hunger: The article provides clear examples of how climate change affects food security. It notes that “Climate change is increasingly disrupting food supplies, which in turn is driving up price inflation” and points to the UK’s reliance on imported “fruit, vegetables, meat and fish” and the “surging prices” of commodities like coffee and cocoa due to volatile climate conditions.
• SDG 11: Sustainable Cities and Communities: The issue of climate resilience in human settlements is raised through the example of properties becoming “uninsurable due to increasing flood risk.” This highlights the direct impact of climate change on the safety and financial security of communities.
• SDG 17: Partnerships for the Goals: The article itself is an example of this SDG in action, as it reports on a wildlife charity (WWF) and a coalition of economists urging a public institution (the Bank of England) to change its policies. It also calls for the Bank to “co-ordinate with government fiscal policy and industrial strategy,” which speaks to the need for policy coherence for sustainable development.

Specific SDG Targets Identified

Based on the article’s content, several specific targets under the identified SDGs can be pinpointed:

1. SDG 13: Climate Action

   • Target 13.2: “Integrate climate change measures into national policies, strategies and planning.” The core demand of the article is for the Bank of England, a key national financial institution, to improve its analysis of climate impacts and “align its own policymaking with an orderly transition” to a net-zero economy.

2. SDG 8: Decent Work and Economic Growth

   • Target 8.4: “Improve progressively, through 2030, global resource efficiency in consumption and production and endeavour to decouple economic growth from environmental degradation…” The call for the Bank to support the “transition to a net zero, nature-positive economy” is a direct call to action to help decouple UK economic stability from environmentally harmful practices.

3. SDG 2: Zero Hunger

   • Target 2.c: “Adopt measures to ensure the proper functioning of food commodity markets… in order to help limit extreme food price volatility.” The article’s concern over climate change “driving up price inflation” for food and the “surging prices” of commodities like coffee and cocoa directly relates to the need to manage and limit food price volatility.

4. SDG 11: Sustainable Cities and Communities

   • Target 11.5: “By 2030, significantly reduce… the direct economic losses… caused by disasters, including water-related disasters…” The mention of “making properties uninsurable due to increasing flood risk” points directly to the economic losses caused by climate-related disasters, which this target aims to reduce.

5. SDG 17: Partnerships for the Goals

   • Target 17.14: “Enhance policy coherence for sustainable development.” The recommendation that the Bank of England should “co-ordinate with government fiscal policy and industrial strategy” is a clear call for greater policy coherence between the UK’s monetary and fiscal authorities to address climate change.

Indicators for Measuring Progress

The article mentions or implies several indicators that could be used to measure progress towards the identified targets:

1. Indicators for Economic Stability and Food Prices (SDG 8, SDG 2)

   • Food Price Inflation: The article explicitly states that climate change is “driving up price inflation” for food. Tracking the rate of food price inflation, particularly for imported goods sensitive to “extreme weather events,” serves as a direct indicator of the economic impact on consumers.
   • Commodity Price Volatility: The reference to “surging prices” for “Coffee and cocoa” implies that the volatility and price levels of climate-sensitive commodities are key indicators of supply chain disruption.

2. Indicators for Climate Risk and Resilience (SDG 13, SDG 11)

   • Value of Assets at Risk from Climate Change: The example of “making properties uninsurable due to increasing flood risk” suggests an indicator related to the value or number of properties and assets that are losing insurance coverage or facing significantly higher premiums due to climate-related physical risks.
   • Integration of Climate Risk in Financial Policy: An indicator would be the extent to which the Bank of England has developed and implemented policies that “better address environmental risks.” This could be measured by the inclusion of climate scenarios in stress tests and the alignment of its market operations with transition goals, as recommended in the article.

3. Indicators for Institutional Commitment (SDG 17)

   • Resource Allocation: The article notes that the Bank “reduced resources towards climate change work.” Therefore, the budget and staffing levels dedicated to analyzing and managing climate and nature-related risks within the Bank of England would be a clear and measurable indicator of its commitment.

SDGs, Targets, and Indicators Analysis

Source: independent.co.uk