Andrew Bailey's recent speech on tackling climate change "for real" drives home the importance of transition to a net-zero economy - but cautions that the primary responsibility sits with the government, not the central banks.
"We are not here to “solve” climate change or drive the transition. Those with the mandate and the tools to lead this fight sit elsewhere. But central banks do have a role to play, and an important one at that."
So - where does that leave central banks in the fight against climate change, and the UK's commitment to reach net-zero emissions by 2050?
Perhaps unsurprisingly, with the key job of building resilience against the financial risks of climate change. The PRA has set supervisory expectations for banks and insurers, to ensure they adopt a strategic approach to climate change. The FPC's upcoming "Climate change Biennial Exploratory Scenario exercise" will assess the resilience of individual banks, insurers and the wider financial system to different climate scenarios.
Bailey stops short, though, of making any proposals to link regulatory capital requirements to 'green' or 'non-green' exposures. He warns that the prudential regulators do not have (and indeed may never have) sufficiently robust data to put such plans in motion. But equally - he doesn't close the door on the possibility.
Bailey also emphasises the role of climate change risk assessments in setting and implementing monetary policy. While cautioning that more research is still needed in this area, he highlights the Bank of England's recent proposals for greening its Corporate Bond Purchase Scheme as a clear step forward in this area.
it is clear that the biggest component of the journey to net-zero rests not with central banks, but with government, through the delivery of sector-level climate policy pathways – without these the real economy cannot adjust effectively